1) a material item is one that is likely to affect a users decision.
2) if the fair value of an available-for-sale security exceeds its cost, the security should
be written up to fair value and a realized gain should be recognized.
3) under the indirect method, gains and losses from the sale of equipment used in
operations would be included in the cash flows from operating activities section on the
statement of cash flows.
4) if merchandise costing $5,000, with terms 2/10, n/30, is paid within 10 days, the
amount of the purchase discount is $100.
5) all publicly traded u.s. companies must provide their shareholders with an annual
report each year.
6) an expenditure for which of the following items would be considered a revenue
expenditure?
a.plant asset
b.ordinary repair
c.addition
d.improvements
7) each of the following is a feature of internal control except
a.an extensive marketing plan
b.bonding of employees
c.separation of duties
d.recording of all transactions
8) how many required steps are there in the accounting cycle?
a.11
b.9
c.7
d.5
9) goods purchased for future use in the business, such as supplies, are called:
a.prepaid expenses
b.revenues
c.stockholders equity
d.liabilities
10) which of the following steps in the accounting cycle usually occurs only at the end
of a companys annual accounting period?
a.step 3: post to the ledger accounts
b.step 7: prepare financial statements
c.step 6: prepare adjusting trial balance
d.step 9: prepare a post-closing trial balance
11) goodwill
a.is only recorded when generated internally
b.can be subdivided and sold in parts
c.can only be identified with the business as a whole
d.can be defined as normal earnings less accumulated amortization
12)
hooper company prepared the following income statement using the cash basis of
accounting:
additional data:
1>depreciation on a company automobile for the year amounted to $7,000. this amount
is not included in the expenses above.
2>on january 1, 2011, paid for a two-year insurance policy on the automobile
amounting to $1,600. this amount is included in the expenses above.
instructions:
(a)recast the above income statement on the accrual basis in conformity with generally
accepted accounting principles. show computations and explain each change.
(b)explain which basis (cash or accrual) provides a better measure of income.
13) you have just received notice that a customer of yours with an account receivable
balance of $100 has gone bankrupt and will not make any future payments. assuming
you use the allowance method, the entry you make is to
a.debit allowance for doubtful accounts and credit bad debt expense
b.debit allowance for doubtful accounts and credit accounts receivable
c.debit bad debt expense and credit allowance for doubtful accounts
d.debit bad debt expense and credit accounts receivable
14) equipment was purchased for $51,000 on january 1, 2011. freight charges amounted
to $2,100 and there was a cost of $6,000 for building a foundation and installing the
equipment. it is estimated that the equipment will have a $9,000 salvage value at the
end of its 5-year useful life. what is the amount of accumulated depreciation at
december 31, 2012, if the straight-line method of depreciation is used?
a.$20,040
b.$10,020
c.$8,580
d.$17,160
15) the interest on a $8,000, 6%, 60-day note receivable is
a.$480
b.$80
c.$160
d.$240
16) the specific identification method of inventory costing
a.always maximizes a company’s net income
b.always minimizes a company’s net income
c.has no effect on a company’s net income
d.may enable management to manipulate net income
17) rains company is a furniture retailer. on january 14, 2012, rains purchased
merchandise inventory at a cost of $36,000. credit terms were 2/10, n/30. the inventory
was sold on account for $60,000 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. which statement is correct?
a.cash flows were affected on january 14 and january 21
b.gross profit percentage is 60%
c.on january 30, 2012, customers should remit cash in the amount of $59,400
d.there is not enough information available to answer this question
18) holland corporation’s trading portfolio at the end of the year is as follows:
at the end of the year, holland corporation should
a.set up a market adjustment account for common stock b
b.set up a market adjustment account for the portfolio
c.recognize an unrealized gain or lossincome for $5,000
d.report a loss on the income statement for $5,000 under “other expenses and losses.”
19) neufeld company issued $1,000,000 of 6%, 5-year bonds at 98, which pays interest
annually. assuming straight-line amortization, what is the carrying value of the bonds
after one year?
a.$980,000
b.$982,000
c.$984,000
d.$988,000
20) which one of the following is not an accounting problem (issue) associated with
accounts receivable?
a.depreciating accounts receivable
b.recognizing accounts receivable
c.valuing accounts receivable
d.accelerating cash receipts from accounts receivable
21) jenny carson invested $18,000 at 8% annual interest and left the money invested
without withdrawing any of the interest for 15 years. at the end of the 15 years, jenny
decided to withdraw the accumulated amount of money. jenny has found the following
values in various tables related to the time value of money.
which factor would she use to compute the amount she would withdraw, assuming that
the investment earns interest compounded annually?
a.0.31524
b.3.17217
c.8.55948
d.27.15211
22) a bank reconciliation should be prepared
a.whenever the bank refuses to lend the company money
b.when an employee is suspected of fraud
c.to explain any difference between the depositor’s balance per books with the balance
per bank
d.by the person who is authorized to sign checks
23) the following information pertains to bell company. assume that all balance sheet
amounts represent both average and ending balance figures. assume that all sales were
on credit.
what is the profit margin for this company?
a.42.86%
b.18.75%
c.23.5%
d.15.0%
24) to determine the materiality of an account, an accountant would compare it with any
of the following except
a.total assets
b.total liabilities
c.total employees
d.net income
25) norris company issued 15,000 shares of $1 par common stock for $25 per share
during 2012. the company paid dividends of $36,000 and issued long-term notes
payable of $330,000 during the year. what amount of cash flows from financing
activities will be reported on the statement of cash flows?
a.$9,000 net cash inflow
b.$339,000 net cash inflow
c.$705,000 net cash outflow
d.$669,000 net cash inflow
26) which of the following is the correct matching concerning the appropriate
accounting for long-term stock investments?
27)
hess company’s inventory records show the following data for the month of september:
a physical inventory on september 30 shows 250 units on hand.
calculate the value of ending inventory and cost of goods sold if the company uses lifo
inventory costing and a periodic inventory system.
28) when a business holds goods of other parties without taking ownership, and tries to
sell them for a fee, the goods are called ____________ goods.
29) comparative information taken from the goreham company financial statements is
shown below:
instructions
using horizontal analysis, show the percentage change from 2011 to 2012 with 2011 as
the base year.
30) the ______________ principle gives accountants guidance as to when revenue is to
be recorded.
31) on august 1, dogwood company buys 2,000 shares of xyz common stock for
$60,000 cash plus brokerage fees of $1,200. on december 1, the stock investments are
sold for $76,000 in cash. which of the following are the correct journal entries of record
for the purchase and sale of the common stock?
32) on january 1, 2012, the borth company purchased at face value, a $1,000, 6%, bond
that pays interest on january 1 and july 1. borth company has a calendar year end. the
entry for the receipt of interest on july 1, 2012, is
33)