1) The carrying amount of bonds at maturity should be equal to the face value of the
bonds.
2) Since we live in a global economy, all countries have adopted the same accounting
standards for business transactions.
3) Dividends may be declared and paid in cash only.
4) Earnings per share is a standard measure of operating performance that applies to
companies of different sizes and from different industries.
5) The purchase of treasury stock by a corporation increases total assets and
stockholders’ equity.
6) The purchase of treasury stock is reported on the statement of cash flows as a
financing activity.
7) To analyze a company’s financial position, decision makers use data and ratios
computed from various items in the financial statements.
8) Assets include cash, land, and accounts payable
9) A bookkeeper posted the same journal entry twice This will cause the trial balance to
be out of balance
10) Gross profit percentage is calculated by dividing cost of goods sold by net sales.
11) Common Stock and Retained Earnings are increased by debits
12) A stock split is reported on the statement of cash flows as a financing activity.
13) Under the indirect method to prepare the statement of cash flows, depletion expense
must be subtracted from net income when calculating Net Cash Provided by Operating
Activities.
14) If an investor owns less than 20% of the common stock of another company as a
long-term investment:
A) the equity method of accounting should be used for the investment
B) the investor has a controlling interest in the investee
C) the investor usually has little or no influence on the investee
D) the investor has significant influence on the investee
15) The purchase of treasury stock returns ________ to the stockholders but also
________.
A) stock; increases their ownership of the company
B) stock; decreases their ownership of the company
C) cash; increases their ownership of the company
D) cash; decreases their ownership of the company
16) Payment by check is an important internal control since:
A) the check provides a record of the payment
B) the check must be signed by an authorized official who should study the evidence
supporting the payment
C) all checks must be approved by the bank’s internal audit department before they are
paid
D) both A and B are true
17) Other Comprehensive Income is reported on the:
A) income statement
B) statement of comprehensive income
C) statement of retained earnings
D) balance sheet
18) Miller Corporation has $2,000,000 of bonds outstanding. The unamortized premium
is $57,000. If the company retired the bonds at 101, what would be the gain or loss on
the retirement? Ignore any interest due.
A) $20,000 gain
B) $20,000 loss
C) $37,000 gain
D) $57,000 gain
19) A stock dividend is considered small when it is a dividend of:
A) less than 30% but greater than 25% of the corporation’s outstanding stock
B) between 50% and 100% of the corporation’s outstanding stock
C) more than 30% of the corporation’s outstanding stock
D) 25% or less of the corporation’s outstanding stock
20) For discount retailers such as Walmart, inventory turnover equals:
A) sales divided by average inventory
B) cost of goods sold divided by average inventory
C) sales discounts divided by average receivables
D) sales divided by average receivables
21) Which account is credited in the adjusting entry to allocate the cost of equipment to
an expense account?
A) Equipment Expense
B) Depreciation Expense
C) Accumulated Equipment
D) Accumulated Depreciation
22) When reporting stockholders’ equity on the balance sheet, a corporation lists the
accounts in the following order:
A) Retained Earnings, Preferred Stock, Common Stock
B) Common Stock, Preferred Stock, Additional Paid-in Capital, Retained Earnings
C) Preferred Stock, Common Stock, Additional Paid-in Capital, Retained Earnings
D) Retained Earnings, Common Stock, Paid-in Capital in Excess of ParCommon
23) A Trial Balance Worksheet lists:
A) balance sheet accounts only
B) income statement accounts only
C) Retained Earnings at the beginning of the accounting period and Dividends Declared
D) all of the above
24) The fair value of a plant asset is equal to:
A) the amount the business could sell the asset for
B) the amount of cash paid plus the dollar value of noncash consideration given in
exchange for the plant asset at acquisition
C) the amount of cash paid plus the loan taken out to finance the purchase of the plant
asset
D) the amount a company can receive for the asset when sold in order to go out of
business
25) E-commerce pitfalls include all of the following EXCEPT:
A) stolen credit card numbers
B) phishing expedition
C) encryption
D) trojan horses
26) The financing option that has the lowest risk to a company is financing by:
A) retained earnings
B) issuing stock
C) issuing bonds payable
D) issuing notes payable
27) Property, plant and equipment does NOT include:
A) buildings
B) land
C) machinery
D) patent
28) Which of the following is considered to be a more stringent measure of a company’s
ability to pay its current liabilities than the current ratio?
A) Accounts payable
B) Quick ratio
C) Liquidity ratio
D) Collection period
29) If a corporation issues 4,000 shares of $1 par value common stock for $8,000, the
journal entry would include a credit to:
A) Common Stock for $8,000
B) Paid-in Capital in Excess of ParCommon for $8,000
C) Common Stock for $4,000
D) Retained Earnings for $4,000
30) The debit to the Unearned Revenue account represents the:
A) value of services owed to customers
B) amount of cash to be paid for future services
C) amount of cash to be collected from customers
D) value of services performed in the current period
31) Indicate whether the account is an asset (A), liability (L), stockholders’ equity (SE),
revenue (R) or expense (E) account. Also indicate if the account would appear on the
Balance Sheet (BS), Income Statement (IS), Statement of Cash Flows(CF) or the
Statement of Retained Earnings (SRE)
32) The beginning cash balance is $3,000, estimated cash receipts are $105,000, and
estimated cash disbursements are $111,000. How much cash must be borrowed to have
a desired ending balance of $5,000?
A) $2,000
B) $6,000
C) $5,000
D) $8,000
33) Sanfran Company purchased inventory for $100,000. In addition they had purchase
returns of $7,000 and paid freight-in of $8,000. Sanfran Company’s net cost of
purchases would be:
A) $ 85,000
B) $ 99,000
C) $101,000
D) $115,000
34) Under cash-basis accounting, cash receipts are treated as ________ and cash
payments are treated as ________.
A) retained earnings; dividends
B) retained earnings; income
C) revenues; expenses
D) gains; losses
35) Over the term of the bonds, the balance in the Premium on Bonds Payable account
will:
A) increase or decrease if the market is unstable
B) increase
C) decrease
D) not change until the bonds mature
36) Two accounts that would appear on the financial statements of a merchandising
company that are not needed by a service company are:
A) cost of goods sold and depreciation
B) cost of goods sold and net income
C) cost of goods sold and inventory
D) inventory and depreciation
37) Adjusting entries:
A) close the revenue accounts
B) close the expense accounts
C) adjust Cash
D) adjust Unearned Revenue
38) The Pizza Store trades in a delivery car for a newer model. The old delivery car has
a cost of $9,000 and accumulated depreciation of $8,000. The Pizza Store pays cash of
$10,000. The fair value of the newer car is $16,000. What is the gain or loss for the
Pizza Store on the exchange of vehicles?
A) $1,000 Loss
B) $1,000 Gain
C) $5,000 Gain
D) $6,000 Gain
39) A sign(s) of increasing earnings quality is(are):
A) improving gross margin to sales ratio
B) declining operating expenses to sales ratio
C) improving operating income to sales ratio
D) all of the above
40) Pat’s Pets recently paid to have the engine in its delivery van overhauled. The
estimated useful life of the van was originally estimated to be 4 years. The overhaul is
expected to extend the useful life of the van to 10 years. The overhaul is regarded as
a(n):
A) revenue expenditure
B) capital expenditure
C) equity expenditure
D) matching expenditure
41) What journal entry is prepared for a check with insufficient funds for payment?
A) No entry is prepared
B) Debit Cash and credit Accounts Payable
C) Debit Cash and credit Notes Payable
D) Debit Accounts Receivable and debit Cash
42) The debt ratio is computed by dividing:
A) total assets by long-term liabilities
B) total assets by total debt
C) total debt by total assets
D) long-term liabilities by total assets