1) the direct method of preparing the statement of cash flows provides a clearer way of
analyzing cash flow information than the indirect method.
2) the post-closing trial balance shows the net income for the period just ended.
3) a point-of-sale terminal provides control over cash receipts over the counter.
4) a trademark should not be amortized over its useful life.
5) bergan corp. has gross pay for march of $50,000. the journal entry in the payroll
cycle to record salary expense would include a debit to salaries and wages payable for
$50,000.
6) warranties pose an accounting challenge because a company does not know which or
how many products will have to be repaired.
7) only contingencies that are probable and can be estimated are recorded as a liability
and an expense.
8) the accounts payable account is a temporary account.
9) a payable involves a future receipt of cash.
10) on december 1, 2015, parsons inc. sold machinery to a customer for $20,000. the
customer could not pay at the time of sale, but agreed to pay 9 months later, and signed
a 9-month note at 9% interest. how much interest revenue was earned for the entire
term of the note?
a) $1,350
b) $1,200
c) $150
d) $1,800
11) merchandise inventory and cost of goods sold appear ________.
a) on the balance sheet and statement of retained earnings, respectively
b) on the statement of retained earnings and income statement, respectively
c) on the balance sheet and income statement, respectively
d) on the income statement and statement of cash flows, respectively
12) short-term investments ________.
a) are debt and equity securities that the investor expects to hold for more than a year
b) are investments in debt securities or equity securities in which the investor holds less
than 50% of the voting stock and that the investor plans to sell in the very near future
c) are investments in debt and equity securities that are highly liquid and that the
investor intends to sell in one year or less
d) are investments in debt securities, and the investor intends to hold them until
maturity
13) during a period of declining inventory costs, which of the following costing
methods should be used by a company that intends to minimize its tax expenses?
a) first-in, first-out
b) last-in, first-out
c) weighted-average
d) specific identification
14) williams inc. had the following balances and transactions during 2014.
the company maintains its records of inventory on a perpetual basis using the last-in,
first-out method. calculate the amount of ending merchandise inventory at december 31,
2014 using the lower-of-cost-or-market rule.
a) $1,200
b) $1,360
c) $1,020
d) $2,040
15) a plant asset is said to be fully depreciated when the book value is ________.
a) greater than the residual value
b) greater than the market value
c) equal to the residual value
d) equal to the market value
16) the net income of a company for the year ended was $500,000. the company has no
preferred stock. common stockholders’ equity was $1,000,000 at the beginning of the
year and $2,000,000 at the end of the year. calculate the return on common
stockholders’ equity.
a) 18.75%
b) 20.00%
c) 21.43%
d) 33.33%
17) a sequentially numbered document authorizing a cash payment is known as a
________.
a) cash register
b) voucher
c) voucher register
d) ledger folio
18) which of the following is the correct formula to calculate average merchandise
inventory?
a) average merchandise inventory = (beginning merchandise inventory – ending
merchandise inventory) 2
b) average merchandise inventory = (beginning merchandise inventory ending
merchandise inventory) 2
c) average merchandise inventory = (beginning merchandise inventory ending
merchandise inventory) 2
d) average merchandise inventory = (beginning merchandise inventory + ending
merchandise inventory) 2
19) collins computers stored its inventory in a warehouse that was destroyed by a fire in
late november, 2014. its sales office was at a different location. in order to file a claim
with the insurance company, the company’s manager asks you to estimate the inventory
in the warehouse. the following information is available:
the company’s gross profit has historically been 40% of net sales revenue. estimate the
value of the inventory destroyed in the fire using the gross profit method.
a) $369,950
b) $528,550
c) $410,000
d) $388,450
20) which of the following is true of debt securities?
a) debt securities entitle the holder to receipt of a share of profit in the form of
dividends
b) debt securities typically pay interest for a fixed period
c) debt securities include preferred stocks
d) debt securities represent ownership interests of the investors
21) under the perpetual inventory system, when a wholesaler returns the goods
purchased on account, the ________ account is credited.
a) accounts receivable
b) merchandise inventory
c) cost of goods sold
d) accounts payable
22) a business hired a repairman to overhaul its plumbing system. the repairman began
work on september 15 and intends to complete it on october 15. the business will pay
him $4,000 when the work is completed. as of september 30, the work was 50%
complete. provide the adjusting entry to accrue repair expense by the end of september.
(ignore explanation)
23) prepare an income statement and a statement of retained earnings for the month of
june. also, prepare a balance sheet at june 30. the transactions of magna designer
corporation for the first month of their operations are as follows:
on june 1, 2015, magna designer corporation received $25,000 cash from its
stockholders and gave common stock to the stockholders.
the company rendered services to three clients on account with total revenues earned of
$9,000.
it then incurred advertising expense on four different websites and promised to pay a
total of $1,200 at a later date.
on june 13, magna designers purchased $1,000 of office supplies for cash. (the supplies
are not used by june 30.)
on june 22, it received $2,000 on account from its client and deposited it into the
business account.
on june 23, it incurred $1,300 for legal expense and paid cash.
on june 30, magna designers made a payment of $500 to one of the websites that it
owed for advertising provided earlier in the month.
no dividends were given during the month.
24) on october 1, 2015, nurix inc. purchased a patent for $100,000 cash. although the
patent gives legal protection for 20 years, it is expected to be used for only eight years.
journalize the amortization expense for 2015. assume straight-line amortization.
25) the following extract was taken from the worksheet of dutch inc. for the year 2014.
dutch inc.
worksheet
december 31, 2014
from the above information, determine the amount of the rent expense adjustment.
26) on june 30, 2015, regal furniture discarded fully depreciated equipment costing
$35,000. journalize the disposal of the equipment.
27) trimer corp sold a truck for $15,000 cash. it was originally purchased for $50,000
and had accumulated depreciation of $30,000 at the time of sale. give the journal entry
for the sale of truck.
28) luminous electrical inc. performed services costing $8,000 on january 24 and
invoiced the customer. luminous received the $8,000 on january 31. provide the journal
entry on january 31 when the cash was received. (ignore explanation.)