Which of the following is not an objective of financial reporting?
a. To reflect prospective cash receipts to investors and creditors.
b. To reflect prospective cash flows to an enterprise.
c. To reflect resources and claim to resources.
d. To reflect current stock prices and information concerning stock markets.
When using the direct method, how is the collection of cash from customers shown on
the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
Identify which inventory costing method (LIFO or FIFO) achieves the effect listed in
the following items:
a. LIFO
b. FIFO
Prices are rising; profits are higher with this method.
Which of the following is true?
a. Companies usually disclose cash flow per share on their financial statements.
b. Companies usually disclose the sales price of each individual stock transaction on
their financial statements.
c. The issuance of a stock dividend is an investing activity.
d. Financing activities can be inflows or outflows of cash.
Match the following business forms with their characteristics below.
a. Sole proprietorship
b. Partnership
c. Corporation
Easy to raise large sums of money
Which of the following terms characterizes the time period between the investment of
cash in merchandise and the collection of cash from the sale of that merchandise?
a. Operating cycle
b. Natural business year
c. Accounting period
d. Fiscal period
The term used to refer to an asset’s original cost is “historical cost.”
a. True
b. False
Wendt, Inc. counted its ending inventory as $178,000 at year-end, January 31, 2014.
Upon review of the records, it was noted that the following items were in transit during
the count: A) $2,000 of goods shipped by a supplier to Wendt sent FOB destination on
January 31 were received February 5, and were not counted by Wendt.
B) $5,000 of goods shipped by a supplier to Wendt sent FOB shipping point on January
30 were received February 2, and were not counted by Wendt.
C) $6,000 of goods shipped by Wendt to a customer FOB shipping point on January 31
were received by the customer February 3, and were counted by Wendt. Determine the
correct inventory balance at January 31.
a. $178,000
b. $177,000
c. $174,000
d. $172,000
A permanent difference with respect to taxes is a difference that affects the tax records
but not the accounting records, or vice versa.
a. True
b. False
A list of all accounts and their balances which is used to prove the equality of debits and
credits as of a specific date is a(an)
a. Account
b. General Journal
c. Trial Balance
d. Chart of Accounts
The Internal Revenue Service (IRS) recognizes the separate existence of a
proprietorship from its owner.
a. True
b. False
While U.S. GAAP requires a complete set of financial statements, including a balance
sheet, statement of stockholders’ equity, income statement, and statement of cash flows,
IFRS does not .
a. True
b. False
Which of the following solvency ratios is the best measure of a company’s ability to pay
interest and maturing principal amounts on its long-term debt?
a. Debt-to-equity ratio
b. Times interest earned ratio
c. Debt service coverage ratio
d. Earnings per share
Debits are good and credits are bad in financial terms.
a. True
b. False
One significant difference between a classified and a non-classified balance sheet is the
distinction between which of the following items?
a. Assets and liabilities
b. Current and noncurrent items
c. Liabilities and owners’ equity
d. Resources invested by the owners and amounts borrowed from creditors
On May 1, 2015, Xiu Inc. had common stock of $345,000, additional paid-in capital of
$1,298,000, and retained earnings of $3,013,000. Xiu did not purchase or sell any
common stock during the year. The company reported net income of $556,000 and
declared dividends in the amount of $78,000 during the year ended April 30, 2016.
REQUIRED:Prepare a financial statement that explains the differences between the
beginning and ending balances for the accounts in the Stockholders’ Equity category of
the balance sheet.
What is the revenue recognition principle? Are there any exceptions to this rule? If so,
what are they? If not, explain why
The cost of Garmin Corp.’s inventory at the end of the year was $85,000; however,
due to obsolescence, the cost to replace the inventory was only $65,000. Prepare the
journal entry needed at the end of the year.
Federal income tax rules allow businesses to use different inventory costing methods
for tax reporting and financial reporting with one exception. Which of the following
situations is not allowed by federal income tax rules?
Assume that on December 31, 2016, Potaw Company has outstanding 8,000 shares of
$15 par, 6% noncumulative, preferred stock and 40,000 shares of $5 par common stock.
Potaw was unable to declare a dividend in 2014 or 2015 but wants to declare a $75,000
dividend for 2016. REQUIRED: 1> How much total cash is distributed to preferred
stockholders?
2> How much total cash is distributed to common stockholders?
3> What is the dividend per share to preferred stock?
4> What is the dividend per share to common stock?
One of your friends is majoring in Aeronautics. In this industry, leases are very
important and he is interested in knowing a little bit about how international accounting
standards will affect the industry as compared to current U.S. GAAP treatments for
leasing. How would you explain the differences in their applications?
Under themethod, the amount of cash paid to suppliers of inventory is shown as a
deduction in the operating activities category of the cash flow statement.