1) when the cost method is used to account for an investment in stock, dividends
received are accounted for as a reduction in the investment account.
2) sound internal control activities dictate that the amount of cash on hand should be
kept to a maximum.
3) a permanent decline in the market value of an asset is referred to as an impairment.
4) in computing the future value of an annuity, it is necessary to know the interest rate,
the number of compounding periods, and the amount of the periodic payments or
receipts.
5) collection on an account receivable will increase both cash and accounts receivable.
6) under the periodic system, the purchases account is used to accumulate all purchases
of merchandise for resale.
7) the normal balance of all accounts is a debit.
8) the normal balance of an asset is a credit.
9) the normal balance of the dividend account is a credit.
10) the number of common shares outstanding can never be greater than the number of
shares issued.
11) consolidated financial statements are prepared in place of the financial statements
for the parent and subsidiary companies.
12) the amount of stock that may be issued according to the corporations charter is
referred to as the
a.authorized stock
b.issued stock
c.unissued stock
d.outstanding stock
13) brewer inc. has 3,000 shares of 8%, $50 par value, cumulative preferred stock and
100,000 shares of $1 par value common stock outstanding at december 31, 2012, and
december 31, 2011. the board of directors declared and paid a $9,000 dividend in 2011.
in 2012, $36,000 of dividends are declared and paid. what are the dividends received by
the preferred stockholders in 2012?
a.$21,000
b.$18,000
c.$15,000
d.$12,000
14) the interest on a $4,000, 6%, 90-day note receivable is
a.$240
b.$120
c.$60
d.$180
15) keller company issued a five-year interest-bearing note payable for $100,000 on
january 1, 2011. each january the company is required to pay $20,000 on the note. how
will this note be reported on the december 31, 2012, balance sheet?
a.long-term debt, $100,000
b.long-term debt, $80,000
c.long-term debt, $60,000; long-term debt due within one year, $20,000
d.long-term debt of $80,000; long-term debt due within one year, $20,000
16) a company purchased office supplies costing $3,000 and debited office supplies for
the full amount. at the end of the accounting period, a physical count of office supplies
revealed $600 still on hand. the appropriate adjusting journal entry to be made at the
end of the period would be:
a.debit office supplies expense, $3,600; credit office supplies, $3,600
b.debit office supplies, $600; credit office supplies expense, $600
c.debit office supplies expense, $2,400; credit office supplies, $2,400
d.debit office supplies, $2,400; credit office supplies expense, $2,400
17) andrea moreland purchased an investment for $9,818.15. from this investment, she
will receive $1,000 annually for the next 20 years starting one year from now. what rate
of interest will andrea be earning on her investment?
ans:
use present value of an annuity of 1 table data.
18) norman company completed the following transactions in october: norman uses a
perpetual inventory system.
instructions
(a)indicate the cash received for each collection. show your calculations.
(b)prepare the journal entry for the
(1)oct. 17 sale. the merchandise sold had a cost of $3,000.
(2)oct. 23 sales return. the merchandise returned had a cost of $200.
(3)oct. 28 collection.
19) collections on accounts receivable will lag behind sales, and accrual sales during a
period will exceed cash collections during the
a.introductory phase
b.growth phase
c.maturity phase
d.decline phase
20) the net income reported on the income statement for the current year was $440,000.
depreciation was $100,000. accounts receivable and inventories decreased by $20,000
and $60,000, respectively. prepaid expenses and accounts payable increased,
respectively, by $2,000 and $16,000. how much cash was provided by operating
activities?
a.$562,000
b.$634,000
c.$602,000
d.$478,000
21) cash receipts from interest and dividends are classified as
a.financing activities
b.investing activities
c.operating activities
d.either financing or investing activities
22) if a resource has been consumed but a bill has not been received at the end of the
accounting period, then:
a.an expense should be recorded when the bill is received
b.an expense should be recorded when the cash is paid out
c.an adjusting entry should be made recognizing the expense
d.it is optional whether to record the expense before the bill is received
23) which of the following is not one of the three forms of business organization?
a.corporations
b.partnerships
c.proprietorships
d.investors
24) when using the indirect method to compute cash provided by operating activities
a.income taxes paid may be ignored
b.amortization expense is added to net income
c.decreases in inventory are subtracted from net income
d.increases in accounts receivable are added to net income
25) wesley hospital installs a new parking lot. the paving cost $30,000 and the lights to
illuminate the new parking area cost $12,000. which of the following statements is true
with respect to these additions?
a.$30,000 should be debited to the land account
b.$12,000 should be debited to land improvements
c.$42,000 should be debited to the land account
d.$42,000 should be debited to land improvements
26) warner company issued $1,600,000 of 6%, 10-year bonds on one of its interest
dates for $1,381,920 to yield an effective annual rate of 8%. the effective-interest
method of amortization is to be used. the journal entry on the first interest payment
date, to record the payment of interest and amortization of discount will include a
a.debit to bond interest expense for $96,000
b.credit to cash for $110,554
c.credit to discount on bonds payable for $14,554
d.debit to bond interest expense for $128,000
27) while preparing the bank reconciliation, you notice that a check, written by the
company for $750, has been outstanding for 5 months. what is the best action for you to
take?
a.void the check. if it has not been cashed in 5 months, it will never be cashed
b.issue a replacement check because you assume the original check has been lost
c.wait 3 more months to give the bank more time to clear the check
d.investigate to determine why the check has not cleared
28) a review of the ledger of weakly service co. at december 31, 2011, produces the
following data pertaining to the preparation of annual adjusting entries:
(a)notes payable $70,000: this is a 9-month note, dated september 1, 2011, with an 9%
interest rate.
(b)prepaid rent $648,000. the company rents offices throughout the midwest. during
2011 it signed 10 leases as shown below:
(c)unearned service revenue $183,000. during 2011 the company entered into 13
monthly service contracts with clients. the clients prepaid for the services to be
provided over the contract period in an even manner.
instructions:
prepare the adjusting entries at december 31, 2011. show all computations.
29) sales taxes collected from customers are a ______________ of the business until
they are remitted to the taxing agency.
30) sampson company had the following transactions that took place during the year:
i.paid amount owing to suppliers $2,750.
ii.purchased new equipment for $5,000 by signing a long-term note payable.
iii.purchased a patent and paid $15,000 cash for the asset.
how what is the total effect of these transactions on free cash flow, current cash debt
coverage ratio, and cash debt coverage ratio, respectively?
31) the basic steps in the recording process are: _______________ each transaction,
enter the transaction in a ______________, and transfer the _______________
information to appropriate accounts in the ________________.
32)
33) market adjustment is a valuation _______________ account, which is
_______________ to (from) the cost of the investments.
34) how is a gain or a loss on the sale of a plant asset computed?