1) consistency in accounting means that a company uses the same generally accepted
accounting principles from one accounting period to the next accounting period.
2) when the due date of a note is stated in months, the time factor in computing interest
is the number of months divided by 360 days.
3) a 10% stock dividend will increase the number of shares outstanding but the book
value per share will decrease.
4) discounts taken by the buyer for early payment of an invoice are called sales
discounts by the buyer.
5) a business organized as a separate legal entity owned by stockholders is a
partnership.
6) if an investor owns between 20% and 50% of an investee’s common stock, it is
presumed that the investor has significant influence on the investee.
7) dividends received on investments are accounted for in the same way under the cost
and the equity method.
8) sales discounts is a contra revenue account to sales.
9) an employee assigned to counting computer monitors in boxes should
a.estimate the number if there is a large quantity to be counted
b.read each box and rely on the box description for the contents
c.determine that the box contains a monitor
d.rely on the warehouse records of the number of computer monitors
10) all of the following statements regarding the double-entry system are true except
a.a two-sided effect of each transaction is recorded in appropriate accounts when using
the double-entry system.
b.the double-entry system provides a logical method for recording transactions.
c.both sides of the accounting equation must be affected when recording a transaction
using the double-entry system.
d.when using the double-entry system, the sum of all debits to the accounts must equal
the sum of all credits.
11) a companys past experience indicates that 60% of its credit sales are collected in the
month of sale, 30% in the next month, and 5% in the second month after the sale; the
remainder is never collected. budgeted credit sales were:
the cash inflow in the month of june is expected to be
a.$90,400
b.$68,400
c.$72,000
d.$86,400
12) the current cash debt coverage ratio is used to evaluate
a.solvency
b.profitability
c.liquidity
d.earning power
13) net income will result if gross profit exceeds
a.cost of goods sold
b.operating expenses
c.purchases
d.cost of goods sold plus operating expenses
14) which of the following is not a common cost flow assumption used in costing
inventory?
a.first-in, first-out
b.middle-in, first-out
c.last-in, first-out
d.average cost
15) patterson company had the following transactions pertaining to debt securities held
as an investment.
instructions
(a)journalize the transactions.
(b)prepare the adjusting entry for the accrual of interest on december 31.
16) under a perpetual inventory system
a.accounting records continuously disclose the amount of inventory
b.increases in inventory resulting from purchases are debited to purchases
c.there is no need for a year-end physical count
d.the account purchase returns and allowances is credited when goods are returned to
vendors
17) if total liabilities decreased by $45,000 and stockholders equity increased by
$15,000 during a period of time, then total assets must change by what amount and
direction during that same period?
a.$60,000 increase
b.$30,000 decrease
c.$30,000 increase
d.$45,000 decrease
18) the dividends account
a.appears on the income statement along with the expenses of the business.
b.must show transactions every accounting period.
c.is increased with debits and decreased with credits.
d.is not a proper subdivision of stockholders equity.
19) the purpose of the post-closing trial balance is to:
a.prove that no mistakes were made
b.prove the equality of the permanent account balances that are carried forward into the
next accounting period
c.prove the equality of the temporary account balances that are carried forward into the
next accounting period
d.list all the balance sheet accounts in alphabetical order for easy reference
20) which measure(s) is(are) useful in evaluating the efficiency in managing
inventories?
a.1 only
b.2 only
c.both 1 and 2
d.neither 1 nor 2
21) the allowance method of accounting for uncollectible accounts is required if
a.the company makes any credit sales
b.bad debts are significant in amount
c.the company is a retailer
d.the company charges interest on accounts receivable
22) jimmys repair shop started the year with total assets of $150,000 and total liabilities
of $120,000. during the year the business recorded $315,000 in revenues, $165,000 in
expenses, and dividends of $30,000. stockholders equity at the end of the year was
a.$180,000
b.$150,000
c.$120,000
d.$135,000
23) selected transactions from the journal of giambi inc. during its first month of
operations are presented here.
instructions
(a)post the transactions to t-accounts.
(b)prepare a trial balance at august 31, 2014 .
24) selection of an inventory costing method by management does not usually depend
on
a.the fiscal year end
b.income statement effects
c.balance sheet effects
d.tax effects
25) marvin services corporation had the following accounts and balances:
if the balance of the buildings account was $16,000 and $4,000 of accounts payable
were paid in cash, what would be the total liabilities and stockholders’ equity?
a.$36,000
b.$52,000
c.$32,000
d.$48,000
26) adjusting entries are:
a.not necessary if the accounting system is operating properly
b.usually required before financial statements are prepared
c.made whenever management desires to change an account balance
d.made to balance sheet accounts only
27) hogan industries had the following inventory transactions occur during 2012:
the company sold 51 units at $63 each and has a tax rate of 30%. assuming that a
periodic inventory system is used and operating expenses of $300, what is the
companys after-tax income using fifo? (rounded to whole dollars)
a.$472
b.$548
c.$384
d.$330
28) cash is defined by ifrs as
a.cash on hand
b.demand deposits
c.cash on hand and demand deposits
d.cash on hand, demand deposits, and highly liquid investments
29) on january 1, figgins company purchased as an investment a $1,000, 8% bond for
$1,040. the bond pays interest on january 1 and july 1. what is the entry to record the
interest payment on july 1?
30) physician reference service (prs) provides services to physicians including research
assistance, diagnosis coding, and medical practice software including an advanced
medical record cross-referencing system. prs is aggressive in monitoring other firms’
offerings and ensuring that its services are comparable to all others.
because of its need to stay abreast of new product offerings, prs spends a lot of money
sending professionals to trade shows. in addition, prs has agreements with several
clients whereby the client requests a presentation of a competitor’s services. a prs
employee poses as an employee of the client’s office and attends the presentation,
obtaining as much data and sample information as possible. the cost of the travel and
attending presentations is charged to product development and expensed during the
current year.
in april of this year, prs began selling a software product substitute before the
competitor’s software was released. the competitor, compu-med, sued for copyright
infringement and won. prs had to withdraw its product from the market and pay $1.5
million in damages. prs immediately negotiated an agreement with compu-med to sell
compu-med’s product (since it was prohibited from offering its own version for five
years). this agreement cost an additional $1.3 million, but it allowed prs to continue to
offer a full line of services.
1>what are the ethical issues?
2>what should kelly do?
31) a debit balance in cash over and short is reported in the income statement as
______________.
32) you are part of a group of individuals (incorporators) who want to form a new
corporation. during discussions on forming the business, mark adams makes this
statement:
our business will have accounts receivable and accounts payable. it will also acquire a
substantial amount of computers and equipment. will it be acceptable to use the cash
basis of accounting?
prepare a response for mark and the other incorporators.
33) the trial balance of rachel company at the end of its fiscal year, august 31, 2012,
includes these accounts: inventory $19,200; purchases $144,000; sales $190,000;
freight-in $8,000; sales returns and allowances $3,000; freight-out $1,000; and
purchases returns and allowances $5,000. the ending inventory is $25,000.
instructions
prepare a cost of goods sold section for the year ending august 31.
34) an article in the wall street journal indicated that companies are selling receivables
at a record rate. why do companies sell their receivables?
35) lanier industries owns 45% of mccoy company. for the current year, mccoy reports
net income of $250,000 and declares and pays a $60,000 cash dividend. which of the
following correctly presents the journal entries to record lanier’s equity in mccoy’s net
income and the receipt of dividends from mccoy?
36) when the allowance method is used to account for uncollectible accounts,
____________ is debited when an account is determined to be uncollectible.