1) In which account are postage stamps classified?
a.Cash
b.Office supplies
c.Receivables
d.Inventory
2) Marsh Co. had 2,400,000 shares of common stock outstanding on January 1 and
December 31, 2015 . In connection with the acquisition of a subsidiary company in
June 2014, Marsh is required to issue 100,000 additional shares of its common stock on
July 1, 2016, to the former owners of the subsidiary. Marsh paid $100,000 in preferred
stock dividends in 2015, and reported net income of $1,700,000 for the year. Marsh’s
diluted earnings per share for 2015 should be
a.$0.71
b.$0.68
c.$0.67
d.$0.64
3) Farmer Corp. owned 20,000 shares of Eaton Corp. purchased in 2011 for $450,000.
On December 15, 2014, Farmer declared a property dividend of all of its Eaton Corp.
shares on the basis of one share of Eaton for every 10 shares of Farmer common stock
held by its stockholders. The property dividend was distributed on January 15, 2015 .
On the declaration date, the aggregate market price of the Eaton shares held by Farmer
was $750,000. The entry to record the declaration of the dividend would include a debit
to Retained Earnings of
a.$0
b.$300,000
c.$450,000
d.$750,000
4) An adjusting entry should never include
a.a debit to an expense account and a credit to a liability account
b.a debit to an expense account and a credit to a revenue account
c.a debit to a liability account and a credit to revenue account
d.a debit to a revenue account and a credit to a liability account
5) Why is it necessary to make adjusting entries?
a.The accountant has made errors in recording external transactions
b.Certain facts about the affairs of the business are not included in the ledger as built up
from external transactions
c.The accountant wants to show the largest possible net income for the period
d.The accountant wants to show the net cash flow for the year
6) Which of the following statements is correct regarding receivables?
a.Receivables are written promises of the purchaser to pay for goods or services
b.Receivables are claims held against customers and others for money, goods, or
services
c.Receivables are non-financial assets
d.Receivables that are expected to be collected within a year are classified as
noncurrent
7) When funds are borrowed to pay for construction of assets that qualify for
capitalization of interest, the excess funds not needed to pay for construction may be
temporarily invested in interest-bearing securities. Interest earned on these temporary
investments should be
a.offset against interest cost incurred during construction
b.used to reduce the cost of assets being constructed
c.multiplied by an appropriate interest rate to determine the amount of interest to be
capitalized
d.recognized as revenue of the period
8) What is the primary objective of financial reporting as indicated in the conceptual
framework?
a.Provide information that is useful to those making investing and credit decisions
b.Provide information that is useful to management
c.Provide information about those investing in the entity
d.All of these answer choices are correct
9) December 31,
2015 2014
Assets
Cash$ 440,000$ 200,000
Short-term investments600,000
Accounts receivable (net)1,020,0001,020,000
Inventory1,380,0001,200,000
Long-term investments400,000600,000
Plant assets3,400,0002,000,000
Accumulated depreciation(900,000)(900,000)
Patent 180,000 200,000
Total assets$6,520,000$4,320,000
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities$1,660,000$1,440,000
Notes payable (nontrade)580,000
Common stock, $10 par1,600,0001,400,000
Additional paid-in capital800,000500,000
Retained earnings 1,880,000 980,000
Total liabilities and stockholders’ equity$6,520,000$4,320,000
Information relating to 2015 activities:
Net income for 2015 was $1,300,000.
Cash dividends of $400,000 were declared and paid in 2015 .
Equipment costing $1,000,000 and having a carrying amount of $320,000 was sold in
2015 for $360,000.
A long-term investment was sold in 2015 for $320,000. There were no other
transactions affecting long-term investments in 2015 .
20,000 shares of common stock were issued in 2015 for $25 a share.
Short-term investments consist of treasury bills maturing on 6/30/16.
Net cash provided by Jamisons 2015 operating activities was
a.$1,300,000
b.$1,920,000
c.$1,880,000
d.$1,960,000
10) If a petty cash fund is established in the amount of $250, and contains $150 in cash
and $95 in receipts for disbursements when it is replenished, the journal entry to record
replenishment should include credits to the following accounts
a.Petty Cash, $75
b.Petty Cash, $100
c.Cash, $95; Cash Over and Short, $5
d.Cash, $100
11) Smiley Corp.’s transactions for the year ended December 31, 2015 included the
following:
Purchased real estate for $625,000 cash which was borrowed from a bank.
Sold available-for-sale securities for $500,000.
Paid dividends of $600,000.
Issued 500 shares of common stock for $250,000.
Purchased machinery and equipment for $125,000 cash.
Paid $450,000 toward a bank loan.
Reduced accounts receivable by $100,000.
Increased accounts payable $200,000.
Smiley’s net cash used in investing activities for 2015 was
a.$750,000
b.$375,000
c.$250,000
d.$125,000
12) How is a significant amount of consignment inventory reported in the balance
sheet?
a.The inventory is reported separately on the consignor’s balance sheet
b.The inventory is combined with other inventory on the consignor’s balance sheet
c.The inventory is reported separately on the consignee’s balance sheet
d.The inventory is combined with other inventory on the consignee’s balance sheet
13) On June 1, 2013, Everly Bottle Company sold $2,000,000 in long-term bonds for
$1,754,200. The bonds will mature in 10 years and have a stated interest rate of 8% and
a yield rate of 10%. The bonds pay interest annually on May 31 of each year. The bonds
are to be accounted for under the effective-interest method.
Instructions
(a)Construct a bond amortization table for this problem to indicate the amount of
interest expense and discount amortization at each May 31 . Include only the first four
years. Make sure all columns and rows are properly labeled. (Round to the nearest
dollar.)
(b)The sales price of $1,754,200 was determined from present value tables. Specifically
explain how one would determine the price using present value tables.
(c)Assuming that interest and discount amortization are recorded each May 31, prepare
the adjusting entry to be made on December 31, 2015 . (Round to the nearest dollar.)
14) During 2015, Stout Inc. had the following activities related to its financial
operations:
Carrying value of convertible preferred stock in Stout,
converted into common shares of Stout$ 360,000
Payment in 2015 of cash dividend declared in 2014 to
preferred shareholders186,000
Payment for the early retirement of long-term bonds payable
(carrying amount $2,620,000)2,650,000
Proceeds from the sale of treasury stock (on books at cost of $258,000)300,000
The amount of net cash used in financing activities to appear in Stout’s statement of
cash flows for 2015 should be
a.$1,990,000
b.$2,176,000
c.$2,536,000
d.$2,548,000