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1) which of the following statements regarding the effective interest method of
accounting for bonds characteristics is false?
a.gaap requires use of the effective interest method
b.the amount of periodic interest expense decreases over the life of a discounted bond
issue when the effective interest method is used
c.over the life of the bond, the carrying value increases for discounted bonds when
using the effective interest method
d.the effective interest method applies a constant percentage to the bond carrying value
to compute interest expense
2) maximum benefit from independent internal verification is obtained when
a.it is made on a pre-announced basis
b.it is done by the employee possessing custody of the asset
c.discrepancies are reported to management
d.it is done at the time of the audit
3) charlene cosmetics company just began business and made the following four
inventory purchases in june:
a physical count of merchandise inventory on june 30 reveals that there are 250 units on
hand. using the average cost method, the amount allocated to the ending inventory on
june 30 is
a.$1,463
b.$1,620
c.$1,575
d.$1,500
4) if a company reports a net loss, it
a.may still have a net increase in cash
b.will not be able to pay cash dividends
c.will not be able to get a loan
d.will not be able to make capital expenditures
5) dole industries had the following inventory transactions occur during 2012:
the company sold 153 units at $126 each and has a tax rate of 30%. assuming that a
periodic inventory system is used, what is the companys gross profit using lifo?
(rounded to whole dollars)
a.$14,646
b.$14,190
c.$5,088
d.$4,632
6) which of the following income statement figures would probably be the best
indicator of a companys future performance?
a.total revenues
b.income from operations
c.net income
d.gross profit
7) the following partial amortization schedule is available for courtney company who
sold $300,000, five-year, 10% bonds on january 1, 2012 for $312,000 and uses annual
straight-line amortization.
which of the following amounts should be shown in cell (iv)?
a.$13,200
b.$10,800
c.$14,400
d.$9,600
8) selected transactions of the rains company are listed below.
1>common stock is sold for cash above par value.
2>bonds payable are issued for cash at a discount.
3>interest on a short-term note receivable is collected.
4>merchandise is sold to customers for cash.
5>cash is paid to purchase inventory.
6>equipment is purchased by signing a 3-year, 10% note payable.
7>cash dividends on common stock are declared and paid.
8>one hundred shares of xyz common stock are purchased for cash.
9>land is sold for cash at book value.
10>bonds payable are converted into common stock.
instructions
classify each transaction as either (a) an operating activity, (b) an investing activity, (c)
a financing activity, or (d) a noncash investing and financing activity.
9) which one of the following is not a justification for adjusting entries?
a.adjusting entries are necessary to ensure that the revenue recognition principle is
followed
b.adjusting entries are necessary to ensure that the expense recognition principle is
followed
c.adjusting entries are necessary to enable financial statements to be in conformity with
gaap
d.adjusting entries are necessary to bring the general ledger accounts in line with the
budget
10) herman corporation had net income of $160,000 and paid dividends of $40,000 to
common stockholders and $20,000 to preferred stockholders in 2012. herman
corporations common stockholders equity at the beginning and end of 2012 was
$450,000 and $550,000, respectively. herman corporations payout ratio for 2012 is
a.$5 per share
b.25%
c.20%
d.12.5%
11) the use of prenumbered checks is an example of
a.documentation procedures
b.independent internal verification
c.establishment of responsibility
d.segregation of duties
12) entries are made to the petty cash account when
a.establishing the fund
b.making payments out of the fund
c.recording shortages in the fund
d.replenishing the fund
