1) a new account is opened for each transaction entered into by a business firm.
2) the most generally accepted value used in accounting is market value.
3) a major function of management is to provide the accountant with relevant and
useful information.
4) long term creditors consider a high free cash flow amount an indication of solvency.
5) the return on assets ratio can be computed from the profit margin ratio and the asset
turnover ratio.
6) advances to employees are referred to as accounts receivable.
7) if a company has sales of $130 in 2012 and $182 in 2011, the percentage decrease in
sales from 2011 to 2012 is 140%.
8) a statement of cash flows indicates the sources and uses of cash during a period.
9) the current ratio is one of the most utilized measures of profitability.
10) another name for horizontal analysis is trend analysis.
11) state the effect of the following transactions on the current ratio. use increase,
decrease, or no effect for your answer.
(a)collection of an accounts receivable
(b)declaration of cash dividends
(c)additional stock is sold for cash
(d)accounts payable are paid
(e)equipment is purchased for cash
(f)inventory purchases are made for cash
(g)temporary investments are purchased for cash
12) intangible assets
a.should be reported under the heading property, plant, and equipment
b.are not reported on the balance sheet because they lack physical substance
c.should be reported as current assets on the balance sheet
d.should be reported as a separate classification on the balance sheet
13) in preparing a statement of cash flows, a conversion of bonds into common stock
will be reported in
a.the financing section
b.the “extraordinary” section
c.a separate schedule or note to the financial statements
d.the stockholders’ equity section
14) related selling activities do not include
a.ordering the merchandise
b.making a sale
c.shipping the goods
d.billing the customer
15) all of the following are normally found in a corporations stockholders equity section
except
a.dividends in arrears
b.common stock
c.paid-in capital
d.retained earnings
16) ryan, inc. purchased a delivery truck for $36,000. the company was given a $3,600
cash discount by the dealer, and paid $1,800 sales tax. annual insurance on the truck is
$900. as a result of the purchase, by how much will ryan, inc. increase its truck
account?
a.$36,000
b.$32,400
c.$35,100
d.$34,200
17) trumpeting trumpets has the following inventory data:
assuming that a periodic inventory system is used, what is the cost of goods sold on a
fifo basis.
a.$7,328
b.$7,348
c.$15,392
d.$15,412
18) which of the following is not a significant date with respect to dividends?
a.the declaration date
b.the incorporation date
c.the record date
d.the payment date
19) the accounting principle that requires that the cost flow assumption be consistent
with the physical movement of goods is
a.called the matching principle
b.called the consistency principle
c.nonexistent; that is, there is no such accounting requirement
d.called the physical flow assumption
20) on january 1, 2011, m. johanson company purchased equipment for $30,000. the
company is depreciating the equipment at the rate of $500 per month. the book value of
the equipment at december 31, 2011 is:
a.$0
b.$6,000
c.$24,000
d.$30,000
21) ace company is a retailer operating in an industry that experiences inflation (rising
prices). ace wants the most realistic ending inventory. which inventory costing method
should ace consider using?
a.average because all inventory costs will then represent an average amount
b.specific identification is the most realistic method because it involves the actual costs
c.lifo because ending inventory represents the earliest costs
d.fifo because ending inventory represents the latest costs
22) jim gant has worked for dr. ken flood for several years. jim demonstrates a loyalty
that is rare among employees. he hasn’t taken a vacation in the last three years. one of
jim’s primary duties at the medical office is to open the mail and list the checks
received. he also takes cash from patients at the cashier window as patients leave. at
times it is so hectic that jim doesn’t bother with giving patients a receipt for the cash
paid on their accounts. he assures them he will see to it that they receive the proper
credit. when the traffic is slow in the office jim offers to help lisa post the payments to
the patients’ accounts receivable. she is always happy to receive his help, because he is
a very conscientious worker.
instructions
identify any principles of internal control that may be violated in this medical office
situation.
23) match the items below by entering the appropriate code letter in the space provided.
1>the date the board of directors formally declares a dividend.
2>the amount that must be retained in the business for the protection of creditors.
3>preferred stockholders have a right to receive current and unpaid prior-year dividends
before common stockholders receive any dividends.
4>the chief accounting officer.
5>measures the percentage of earnings distributed in the form of dividends to common
stockholders.
6>the amount assigned to each share of stock in the corporate charter.
7>a debit balance in retained earnings.
8>enables stockholders to maintain their same percentage ownership when new shares
are issued.
9>corporations own stock that has been reacquired by the corporation but not retired.
10>a pro rata distribution of the corporations own stock to stockholders.
24) terrell corporation makes an investment in 200 shares of simpson company’s
common stock. the stock is purchased for $50 a share plus brokerage fees of $800. the
entry for the purchase is:
25) the _____________________ of an annuity is the sum of all the payments plus the
accumulated compound interest on them.
26) when a bond sells at a discount, what is probably true about the market interest rate
versus the stated interest rate? discuss.
27) at the end of an accounting period, if the fair value of the trading portfolio is less
than its cost, then the company should recognize an ______________ that is reported
on the _________________.
28) for each item listed below, enter a code letter in the blank space to indicate the
allocation terminology for the item. use the following codes for your
29) hilton cosmetics acquired 10% of the 200,000 shares of common stock of ace
fashion at a total cost of $14 per share on march 18, 2012. on june 30 ace declared and
paid a $60,000 dividend. on december 31 ace reported net income of $244,000 for the
year. at december 31 the market price of ace fashion was $16 per share. the stock is
classified as available-for-sale.
instructions
prepare all the necessary entries for 2012 for hilton cosmetics.