1) during the month, a company sells goods for a total of $106,000, which includes
sales taxes of $6,000; therefore, the company should recognize $100,000 in sales
revenues and $6,000 in sales tax expense.
2) the book value of a plant asset is the amount originally paid for the asset less
anticipated salvage value.
3) when the average cost method is applied to a perpetual inventory system, a moving
average cost per unit is computed with each purchase.
4) in preparing a statement of cash flows, the issuance of debt should be reported
separately from the retirement of debt.
5) materiality and cost are two constraints in accounting.
6) unless there is evidence to the contrary, an investor owning 25% of the stock of an
investee is assumed to have significant influence.
7) if the straight-line method of amortization is used, the amount of unamortized
premium on bonds payable will increase as the bonds approach maturity.
8) when using the allowance method bad debt expense is recorded when an individual
customer defaults.
9) convertible bonds are often called callable bonds.
10) premium 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.
11) goods in transit shipped fob shipping point should be included in the buyers ending
inventory.
12) on april 1, 2011, npropel corporation paid $48,000 cash for equipment that will be
used in business operations. the equipment will be used for four years. npropel records
depreciation expense of $48,000 for the calendar year ending december 31, 2011. which
accounting principle has been violated?
a.depreciation principle
b.no principle has been violated
c.cash principle
d.expense recognition principle
13) thompson corporations unadjusted trial balance includes the following balances
(assume normal balances):
bad debts are estimated to be 6% of outstanding receivables. what amount of bad debt
expense will the company record?
a.$67,140
b.$45,840
c.$44,562
d.$68,418
14) petersen company is preparing a cash budget for september. the companys cash
balance on september 1 is $8,700. the company anticipates cash receipts of $41,925 and
cash disbursements of $43,995. if petersen desires a cash balance of $9,000, it must
a.acquire financing of $300
b.acquire financing of $2,370
c.acquire financing of $1,770
d.acquire financing of $6,930
15) the following amounts were taken from the financial statements of turner company:
the profit margin ratio for 2012 is
a.18.0%
b.18.4%
c.17.5%
d.36%
16) which of the following bank reconciliation items would not result in an adjusting
entry?
a.service charge
b.deposits in transit
c.nsf check of customer
d.collection of a note by the bank
17) when a company owns more than 50% of the common stock of another company
a.affiliated financial statements are prepared
b.consolidated financial statements are prepared
c.controlling financial statements are prepared
d.significant financial statements are prepared
18) each of the following is a major type (or category) of adjusting entry except:
a.earned expenses
b.prepaid expenses
c.accrued expenses
d.accrued revenues
19) if the cost method is used to account for an investment in common stock
a.it is presumed that the investor has significant influence on the investee
b.the earning of net income by the investee is considered a proper basis for recognition
of income by the investor
c.net income of the investee is not considered earned by the investor until dividends are
declared by the investee
d.the investment account may be at times greater than the acquisition cost
20) which accounting assumption assumes that an enterprise will continue in operation
long enough to carry out its existing objectives and commitments?
a.monetary unit assumption
b.economic entity assumption
c.periodicity assumption
d.going concern assumption
21) the characteristic of consistency relates most closely to
a.relevance
b.materiality
c.comparability
d.faithful representation
22) for the basic accounting equation to stay in balance, each transaction recorded must
a.affect two or less accounts.
b.affect two or more accounts.
c.always affect exactly two accounts.
d.affect the same number of asset and liability accounts.
23) each of the following items may be classified as operating or financing activities
under ifrs except
a. dividends paid
b. dividends received
c. interest paid
d. all of the above may be classified as such
24) which of the following transactions does not affect cash during a period?
a.write-off of an uncollectible account
b.collection of an accounts receivable
c.sale of treasury stock
d.redeeming bonds before maturity
25) if the market rate of interest is lower than the contractual interest rate, the bonds
will sell at
a.face value
b.a premium
c.a discount
d.an unknown amount
26) which of the following is not an internal control procedure for cash?
a.payments should be made with cash
b.there should be limited access to cash
c.the amount of cash on hand should be kept to a minimum
d.cash should be deposited daily
27) a furniture factory’s employees work overtime to finish an order that is sold on
january 31. the office sends a statement to the customer in early february and payment
is received by mid-february. the overtime wages should be expensed in:
a.january
b.february
c.the period when the workers receive their checks
d.either january or february depending on when the pay period ends
28) carter company reported these income statement data for a 2-year period.
carter company uses a periodic inventory system. the inventories at january 1, 2011, and
december 31, 2012, are correct. however, the ending inventory at december 31, 2011, is
overstated by $8,000.
instructions
(a)prepare correct income statement data for the 2 years.
(b)what is the cumulative effect of the inventory error on total gross profit for the 2
years?
29) in the month of may, lopat company inc. wrote checks in the amount of $37,000. in
june, checks in the amount of $50,632 were written. in may, $33,872 of these checks
were presented to the bank for payment, and $43,532 in june. what is the amount of
outstanding checks at the end of may?
a.$7,100
b.$3,128
c.$10,228
d.$14,200
30) if a company has an extraordinary gain of $20,000 and a 30% tax rate, what is the
effect on net income?
a.increase of $20,000
b.increase of $14,000
c.increase of $6,000
d.no effect
31) which measure would a long-term creditor be least interested in reviewing?
a.free cash flow
b.debt to total assets ratio
c.current ratio
d.solvency measure
32) the book value of a depreciable asset is always equal to its market value because
depreciation is a valuation technique.
33)
on january 1, the biddle & biddle, cpas received a $6,000 cash retainer for legal services to
be provided rateably over the next 3 months. the full amount was credited to the liability
account unearned revenue. assuming that the revenue is earned rateably over the 3 month
period, what adjusting journal entry should be made at january 31?
34) moss county bank agrees to lend the sadowski brick company $400,000 on january
1. sadowski brick company signs a $400,000, 6%, 9-month note. the entry made by
sadowski brick company on january 1 to record the proceeds and issuance of the note is
35) both a stock split and a stock dividend will _________________ the number of
shares outstanding and have _________________ on total stockholders equity.
36) _______________ of accounting information are managers who plan, organize, and
run a business.
37) transactions for the hartman company for the month of november are presented
below. journalize each transaction and identify each transaction by number. you may
omit journal explanations.
1)stockholders invested an additional $40,000 cash in the business.
2)purchased land costing $18,000 for cash.
3)purchased equipment costing $45,000 for $4,500 cash and the remainder on credit.
4)purchased supplies on account for $800.
5)paid $3,000 for a one-year insurance policy.
6)received $2,000 cash for services performed.
7)received $5,000 for services previously performed on account.
8)paid wages to employees for $2,500.
9)paid dividends to stockholders of $400.
38) the bank statement for adcock company indicates a balance of $830 on july 3 the
cash balance per books had a balance of $390 on this date. the following information
pertains to the bank transactions for the company.
instructions
39) an accountant has debited an asset account for $900 and credited a liability account
for $600. what can be done to complete the recording of the transaction?
adebit a stockholders equity account for $300.
b.debit another asset account for $300.
c.credit a different asset account for $300.
d.nothing further must be done.
40) given the following information, determine the adjusted cash balance per books;
41) identify the factors that are considered in classifying an expenditure as a capital or a
revenue expenditure. are there instances where it may be difficult to classify an
expenditure as one or the other (e.g., the purchase of a wastebasket that has a useful life
of 5 years and cost $10)? what basis would be used in a decision?