1) general and administrative expenses are a category of operating expense.
2) a business can shorten its operating cycle by increasing its percentage of cash sales
and reducing its percentage of credit sales.
3) the carrying value of bonds is calculated by adding the balance of the discount on
bonds payable account to the balance in the bonds payable account.
4) the liability of corporate stockholders is limited to the amount of their investment.
5) companies only dispose of plant assets by either sale or exchange.
6) the higher the sales tax rate, the more profit a retailer can earn.
7) a series of equal periodic receipts or payments are called annuities.
8) under the equity method, the receipt of dividends from the investee company results
in an increase in the stock investments account.
9) treasury stock is a contra stockholders equity account.
10) the amount of interest involved in any financing transaction is based on two
elements, principal and interest rate.
11) a credit to a liability account
a.indicates an increase in the amount owed to creditors.
b.indicates a decrease in the amount owed to creditors.
c.is an error.
d.must be accompanied by a debit to an asset account.
12) xyz company accepted a national credit card for a $5,000 purchase. the cost of the
goods sold is $4,000. the credit card company charges a 3% fee. what is the impact of
this transaction on net operating income?
a.increase by $970
b.increase by $1,000
c.increase by $850
d.increase by $4,850
13) as the president of harter company, you notice that no discounts have been taken
when settling accounts payables. what would be an acceptable explanation?
a.all invoices have credit terms of n/30
b.there is not sufficient cash to pay within the discount period
c.discounts are missed because no one knows how to enter them in the new accounting
software
d.the full amount of the invoice is being paid within the discount period and the
treasurer is pocketing the discount amount
14) a company purchased land for $72,000 cash. real estate brokers’ commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. proceeds from salvage of the demolished
building was $1,200. under the cost principle, the cost of land would be recorded at
a.$82,800
b.$72,000
c.$77,800
d.$84,000
15) a comparative balance sheet for the visser corporation is presented below:
$195,000
additional information:
1>net loss for 2012 is $15,000. net sales for 2012 are $250,000.
2>cash dividends of $9,000 were declared and paid in 2012.
3>land was sold for cash at a loss of $5,000. this was the only land transaction during
the year.
4>equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold
for $5,000 cash.
5>$12,000 of bonds were retired during the year at carrying (book) value.
6>equipment was acquired for common stock. the fair value of the stock at the time of
the exchange was $25,000.
instructions
1>prepare a statement of cash flows for the year ended 2012 using the indirect method.
2>compute the following cash based ratios:
a.current cash debt coverage ratio
b.cash debt coverage ratio
16) for each of the following accounts indicate (a) the type of account (asset, liability,
stockholders equity, revenue, and expense), (b) the debit and credit effects, and (c) the
normal account balance.
example
17) brevard corporation purchased a taxicab on january 1, 2011 for $34,000 to use for
its shuttle business. the cab is expected to have a five-year useful life and no salvage
value. during 2012, it retouched the cab’s paint at a cost of $1,600, replaced the
transmission for $4,000 (which extended its life by an additional 2 years), and tuned-up
the motor for $200. if brevard corporation uses straight-line depreciation, what annual
depreciation will brevard report for 2012?
a.$6,800
b.$5,200
c.$5,500
d.$5,467
18) the first step in the recording process is to
a.prepare financial statements.
b.analyze the transaction in terms of its effect on the accounts.
c.post to a journal.
d.prepare a trial balance.
19) the name given to entering transaction data in the journal is
a.chronicling.
b.listing.
c.posting.
d.journalizing.
20) determine the missing items.
assets = liabilities+ stockholders equity
$75,000 $56,000 (a)
(b) $28,000 $34,000
$84,000 (c) $55,000
21) sales revenue
a.may be recorded before cash is collected
b.will always equal cash collections in a month
c.only results from credit sales
d.is only recorded after cash is collected
22) in periods of rising prices, the inventory method which results in the inventory
value on the balance sheet that is closest to current cost is the
a.fifo method
b.lifo method
c.average cost method
d.tax method
23) marks repair service uses the straight-line method of depreciation. the company’s
fiscal year end is december 3 the following transactions and events occurred during the
first three years.
instructions
prepare the necessary entries. (show computations.)
24) the following information is available for quayle company:
instructions
1>use the above information to prepare a multiple-step income statement for the year
ended december 31, 2012.
2>compute the profit margin ratio.
25) young company lends dobson industries $30,000 on august 1, 2012, accepting a
9-month, 12% interest note. if young prepares it financial statements as of december 31,
2012, what adjusting entry must it make?
26) the following information is available from the annual reports of flynn company
and tolan inc.
instructions
1>calculate the profit margin ratio and gross profit rate for each company.
2>what conclusion concerning the relative profitability of the two companies can be
drawn from these data?
27) gaap’s, accounting and internal control procedures related to cash and the definition
of cash equivalents, as compared to ifrs are:
28) internal control over cash disbursements is more effective when payments are made
by ______________, rather than by ______________.
29) mohling company typically sells subscriptions on an annual basis, and publishes
eight times a year. the magazine sells 60,000 subscriptions in january at $10 each. what
entry is made in january to record the sale of the subscriptions?
30) depreciation is an __________________ concept, not a ________________
concept.
31) the cash basis of accounting is not in accordance with generally accepted
accounting principles.
32) a useful measure of profitability is the ratio of net income to _____________.