1) if total assets are increased, there must be a corresponding increase in liabilities or a
decrease in stockholders equity.
2) the return on assets ratio indicates how efficiently a company uses its assets.
3) notes payable are often used instead of accounts payable.
4) a system of internal control cannot be considered good until the possibility of human
error has been completely eliminated.
5) the specific identification method of inventory valuation is desirable when a
company sells a large number of low-unit cost items.
6) using the indirect method, an increase in accounts receivable during a period is
deducted from net income in calculating cash provided by operations.
7) under the lcm basis, market is defined as selling price, not current replacement cost.
8) revenues have the effect of increasing retained earnings.
9) with the periodic inventory system, goods available for sale must be calculated
before cost of goods sold.
10) stocks traded on the new york stock exchange are considered readily marketable.
11) nix corporation sold equipment for $12,000. the equipment had an original cost of
$36,000 and accumulated depreciation of $18,000. ignoriing the tax effect, as a result of
the sale
a.net income will increase $12,000
b.net income will increase $6,000
c.net income will decrease $6,000
d.net income will decrease $12,000
12) liabilities are generally classified on a balance sheet as
a.small liabilities and large liabilities
b.present liabilities and future liabilities
c.tangible liabilities and intangible liabilities
d.current liabilities and long-term liabilities
13) if bonds are originally sold at a discount using the straight-line amortization
method:
a.interest expense in the earlier years of the bond’s life will be less that the interest to be
paid
b.interest expense in the earlier years of the bond’s life will be the same as interest to be
paid
c.unamortized discount is subtracted from the face value of the bond to determine its
carrying value
d.unamortized discount is added to the face value of the bond to determine its carrying
value
14) a purchase of common stock of colt corporation for $14,000 was sold three months
later for $15,000. the entry to record the sale would include a
a.debit to cash of $14,000
b.credit to gain on sale of stock investments of $1,000
c.credit to stock investments of $15,000
d.credit to interest revenue of $1,000
15) grape gratuities company has the following inventory data:
a physical count of merchandise inventory on july 30 reveals that there are 30 units on
hand. using the fifo inventory method, the amount allocated to ending inventory for july
is
a.$600
b.$610
c.$640
d.$660
16) which of the following organizations issues accounting standards for countries
outside the united states?
a.sec
b.gaap
c.iasb
d.fasb
17) which accounts normally have credit balances?
a.revenues, liabilities, and dividends
b.revenues, liabilities, and assets
c.revenues, liabilities, and retained earnings
d.revenues, liabilities, and expenses
18) information that is not generally reported for each class of stock on the balance
sheet is
a.the market value
b.the par value
c.shares authorized
d.shares issued
19) how are each of the following financial statements interrelated? (a) retained
earnings statement and income statement. (b) retained earnings statement and balance
sheet. (c) balance sheet and statement of cash flows.
20) in performing a vertical analysis, the base for cost of goods sold is
a.total selling expenses
b.net sales
c.total revenues
d.total expenses
21) the maturity value of a $30,000, 12%, 3-month note receivable is
a.$30,900
b.$30,360
c.$33,600
d.$30,300
22) a company decides to exchange its old machine and 770,000 cash for a new
machine. the old machine has a book value of 630,000 and a fair value of 700,000 on
the date of the exchange. the cost of the new machine would be recorded at
a.1,400,000
b.1,470,000
c.1,330,000
d.cannot be determined
23) which of the following would be added to the balance per bank on a bank
reconciliation?
a.outstanding checks
b.deposits in transit
c.notes collected by the bank
d.service charges
24) under the allowance method, when a specific account is written off
a.total assets will be unchanged
b.net income will decrease
c.total assets will decrease
d.total assets will increase
25) dobler company uses a periodic inventory system. details for the inventory account
for the month of january 2012 are as follows:
an end of the month (1/31/2012) inventory showed that 140 units were on hand. how many
units did the company sell during january 2012?
a.60
b.140
c.200
d.260
26) which of the following is not considered an asset?
a.equipment
b.dividends
c.accounts receivable
d.inventory
27) the future value of a ________________ is the value at the future date of a given
amount invested, assuming compound interest.
28)
shatner company has budgeted sales revenue as follows:
past experience has indicated that 80% of sales each month are on credit and that
collection of credit sales occurs as follows: 60% in the month of sale, 30% in the month
following the sale, and 5% in the second month following the sale. the other 5% is
uncollectible.
instructions
prepare a schedule which shows expected cash receipts from sales for the months of
april, may, and june.
29) posting is the procedure of transferring journal entries to ________________.
30) the three accounts shown below appear in the general ledger of parks corp. during
2012
instructions
from the postings in the accounts, indicate how the information is reported on a
statement of cash flows using the indirect method. the loss on sale equipment was
$4,000.
31) greenstream insurance agency prepares monthly financial statements. presented
below is an income statement for the month of june that is correct on the basis of
information considered.
additional data: when the income statement was prepared, the company accountant
neglected to take into consideration the following information:
1>a utility bill for $1,200 was received on the last day of the month for electric and gas
service for the month of june.
2>a company insurance salesman sold a life insurance policy to a client for a premium
of $20,000. the agency billed the client for the policy and is entitled to a commission of
20%.
3>supplies on hand at the beginning of the month were $2,000. the agency purchased
additional supplies during the month for $1,500 in cash and $1,200 of supplies were on
hand at june 30.
4>the agency purchased a new car at the beginning of the month for $24,000 cash. the
car will depreciate $6,000 per year.
5>salaries owed to employees at the end of the month total $5,300. the salaries will be
paid on july 5.
instructions:
prepare a corrected income statement.
32) an account is an important accounting record where financial information is stored
until needed. briefly explain (1) the nature of an account, (2) the different types of
accounts, and (3) the manner in which an account is increased and decreased and its
normal balance.
33) the market price of bonds is obtained by computing the present value of the
________________ paid at maturity, and all ________________ payments to be made
over the term of the bond.
34) match the items below by entering the appropriate code letter in the space provided.
1>bonds subject to retirement at a stated dollar amount prior to maturity.
2>a legal document that sets forth the terms of a bond issue.
3>bonds that mature in installments.
4>a measure of a companys short-term liquidity.
5>the time that the final payment on a bond is due from the bond issuer.
6>a measure of a companys solvency.
7>the rate investors demand for loaning funds to a corporation.
8>unsecured bonds issued against the general credit of the borrower.
9>occurs when the contractual rate of interest is less than the market rate of interest.
10>produces a periodic interest expense that is the same amount each interest period.
35) two limitations of systems of internal control are the concept of ______________
and the ______________.