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1) the cost of treasury stock is deducted from total paid-in capital and retained earnings
in determining total stockholders equity.
2) a change in the estimated useful life of a plant asset may cause a change in the
amount of depreciation recognized in the current and future periods, but not to prior
periods.
3) the computer has made the periodic inventory system more popular and easier to
apply.
4) if the proceeds from the sale of a plant asset exceed its book value, a gain on disposal
occurs.
5) non-operating activities include revenues and expenses that are related to the
companys main line of operations.
6) using the cost method of accounting for a stock investment, the journal entry to
record the receipt of dividends involves a credit to dividend revenue.
7) if bonds are issued at a premium, the carrying value of the bonds will be greater than
the face value of the bonds for all periods prior to the bond maturity date.
8) cash register tapes provide evidence of credit sales.
9) when the terms of sale are fob shipping point, legal title to the goods remains with
the seller until the goods reach the buyer.
10) in computing the present value of an annuity, it is not necessary to know the number
of discount periods.
11) the double-entry system of accounting refers to the placement of a double line at the
end of a column of figures.
12) compound interest is computed on the principal and any interest earned that has not
been withdrawn.
13) one objective of the income statement is to separate the results of continuing
operations from those of discontinued operations.
14) cash restricted in use should be separately reported on the balance sheet.
15) the interest charged on a $200,000 note payable, at the rate of 6%, for a year would
be
a.$12,000
b.$6,000
c.$3,000
d.$1,000
16) a trial balance
a.is a list of accounts with their balances at a given point in time.
b.will not balance if a correct journal entry is posted twice.
c.will tell you if a transaction is not posted at all.
d.proves the factual accuracy of journalized transactions.
17) a balance sheet that displays only component percentages is called a ________
balance sheet.
a.condensed
b.common size
c.comparative
d.trendy
18) if a customer agrees to retain merchandise that is defective because the seller is
willing to reduce the selling price, this transaction is known as a sales
a.discount
b.return
c.contra asset
d.allowance
19) the interest rate for a three-month loan would normally be stated in terms of which
of the following rates of interest?
a.daily
b.monthly
c.quarterly
d.annual
20) use the following data to determine the total amount of working capital.
a.$270,000
b.$590,000
c.$150,000
d.$120,000
21) which accounts normally have debit balances?
a.assets, expenses, and revenues
b.assets, expense, and retained earnings
c.assets, liabilities, and dividends
d.assets, expenses, and dividends
22) for the income statement, ifrs requires
a.single-step approach
b.multiple-step approach
c.single-step approach or multiple-step approach
d.no specific income statement approach
23) the phase in the product life cycle when a company is purchasing fixed assets and
beginning to produce and sell is the
a.introductory phase
b.growth phase
c.maturity phase
d.decline phase
24) the chief financial officer (cfo) of superclean corporation requested that the
accounting department prepare a preliminary balance sheet on december 30, 2012
so that the cfo could get an idea of how the company stood. he knows that certain debt
agreements with its creditors require the company to maintain a current ration of at least
2: the preliminary balance sheet is as follows.
superclean corporation
balance sheet
december 30, 2012
instructions
(a)calculate the current ratio and working capital based on the preliminary balance
sheet.
(b)based in the results in (a), the cfo requested that $20,000 of cash be used to pay off
the balance of the accounts payable account on december 31, 2012. calculate the new
current ratio and working capital after the company takes these actions.
25) in recording an accounting transaction in a double-entry system
a.the number of debit accounts must equal the number of credit accounts.
b.there must always be entries made on both sides of the accounting equation.
c.the amount of the debits must equal the amount of the credits.
d.there must only be two accounts affected by any transaction.
26) the direct write-off method is acceptable for financial reporting purposes only if the
bad debt losses are insignificant.
a.this is a false statement because the direct write-off method violates the matching
principle
b.this is a true statement based on the constraint of materiality
c.this is a false statement because the direct write-off method can only be used for tax
reporting
d.this is a true statement because companies can choose either the direct write-off or the
allowance method for financial reporting, as long as they consistently apply the method
27) treasury shares plus outstanding shares equal
a.authorized stock
b.issued stock
c.unissued stock
d.distributable stock
28) your friend, jeff, has opened a movie theater. jeff states that he does not have time
to develop and implement a system of internal controls.
a. provide jeff with the objectives of a system of internal control.
b. explain to jeff why he should develop a system of internal control.
29) garrison company had the following transactions pertaining to its short-term stock
investments.
instructions
(a)journalize the transactions.
(b)indicate the income statement effects of the transactions.
30) oxford inc. was authorized to issue 50,000 £10 par value ordinary shares. as of
december 31, 2011, the company had issued 22,000 shares at an average price of £22
per share. during 2011, the company felt that the shares were undervalued so it
purchased 5,000 treasury shares at £18 per share. when the share price rebounded later
in the year, the company sold 2,000 of the treasury for £25. retained earnings was
£829,000 at december 31, 2011.
the amount of share premium reported on the december 31, 2011 statement of financial
position is
a.£140,000
b.£264,000
c.£278,000
d.£484,000
31) under gaap, companies can choose which inventory system?
32) the expense recognition principle requires that efforts be related to
accomplishments.
33) railsback company purchased a machine on january 1, 2012, at a cost of $64,000.
the machine is expected to have an estimated salvage value of $4,000 at the end of its
5-year life. the company capitalized the machine and depreciated it in 2012 using the
double-declining-balance method of depreciation. the company has a policy of using
the straight-line method to depreciate equipment but the company accountant neglected
to follow company policy when he used the double-declining-balance method. net
income for the year ended december 31, 2012, was $55,000 before taxes as the result of
depreciating the machine incorrectly.
instructions
using the method of depreciation that the company normally follows, prepare the
correcting entry and determine the corrected net income for 2012. (show computations.)
34) steve rondelli, a fellow student, contends that the double-entry system means each
transaction must be recorded twice. is steve correct? explain.
35) liabilities are classified on the balance sheet as being _______________ liabilities
or ______________ liabilities.
