1) in general, debits refer to increases in account balances, and credits refer to
decreases.
2) the intrinsic value of a stock option is the difference between the market price of the
stock and the exercise price of the options at the grant date.
3) land held for speculation is reported in the property, plant, and equipment section of
the balance sheet.
4) both merchandising and manufacturing companies normally have multiple inventory
accounts.
5) one of the challenges in developing a common conceptual framework will be to
agree on how the framework should be organized since the fasb and iasb conceptual
frameworks are organized in very different ways.
6) the balance sheet omits many items that are of financial value to the business but
cannot be recorded objectively.
7) off-balance-sheet financing is an attempt to borrow monies in such a way to
minimize the reporting of debt on the balance sheet.
8) research and development costs that result in patents may be capitalized to the extent
of the fair value of the patent.
9) a company should report per share amounts for income before extraordinary items,
but not for income from continuing operations.
10) didde corp. reports operating expenses in two categories: (1) selling and (2) general
and administrative. the adjusted trial balance at december 31, 2012 included the
following expense and loss accounts:
accounting and legal fees$210,000
advertising270,000
freight-out120,000
interest105,000
loss on sale of long-term investment45,000
officers’ salaries335,000
rent for office space330,000
sales salaries and commissions255,000
one-half of the rented premises is occupied by the sales department. didde’s total selling
expenses for 2012 are
a.$810,000
b.$690,000
c.$645,000
d.$555,000
11) bishop co. began operations on january 1, 2012. financial statements for 2012 and
2013 con- tained the following errors:
in addition, on december 31, 2013 fully depreciated equipment was sold for $28,800,
but the sale was not recorded until 2014. no corrections have been made for any of the
errors. ignore income tax considerations.
the total effect of the errors on the balance of bishop’s retained earnings at december 31,
2013 is understated by
a.$338,800
b.$278,800
c.$194,800
d.$146,800
12) when depreciation is computed for partial periods under a decreasing charge
depreciation method, it is necessary to
a.charge a full year’s depreciation to the year of acquisition
b.determine depreciation expense for the full year and then prorate the expense between
the two periods involved
c.use the straight-line method for the year in which the asset is sold or otherwise
disposed of
d.use a salvage value equal to the first year’s partial depreciation charge
13) a company borrows $10,000 and signs a 90-day nontrade note payable. in preparing
a statement of cash flows (indirect method), this event would be reflected as a(n)
a.addition adjustment to net income in the cash flows from operating activities section
b.cash outflow from investing activities
c.cash inflow from investing activities
d.cash inflow from financing activities
14) the gross profit method of inventory valuation is invalid when
a.a portion of the inventory is destroyed
b.there is a substantial increase in inventory during the year
c.there is no beginning inventory because it is the first year of operation
d.none of these
15) which of the following is an implication of the going concern assumption?
a.the historical cost principle is credible
b.depreciation and amortization policies are justifiable and appropriate
c.the current-noncurrent classification of assets and liabilities is justifiable and
signify-cant
d.all of these
16) a trial balance before adjustments included the following:
if the estimate of uncollectibles is made by taking 2% of net sales, the amount of the
adjustment is
a.$13,400
b.$16,440
c.$17,000
d.$19,480
17) markowitz company reported the following data:
what is markowitzs asset turnover for 2013?
a.1.56
b.1.61
c.1.81
d.2.17
18) on january 1, 2013, doty co. redeemed its 15-year bonds of $3,500,000 par value for
102. they were originally issued on january 1, 2001 at 98 with a maturity date of
january 1, 2016. the bond issue costs relating to this transaction were $210,000. doty
amortizes discounts, premiums, and bond issue costs using the straight-line method.
what amount of loss should doty recognize on the redemption of these bonds (ignore
taxes)?
a.$126,000
b.$84,000
c.$70,000
d.$0
19) one of the benefits of the statement of cash flows is that it helps users evaluate
financial flexibility. which of the following explanations is a description of financial
flexibility?
a.the nearness to cash of assets and liabilities
b.the firm’s ability to respond and adapt to financial adversity and unexpected needs and
opportunities
c.the firm’s ability to pay its debts as they mature
d.the firm’s ability to invest in a number of projects with different objectives and costs
20) benson plastics company deposits all receipts and makes all payments by check. the
following information is available from the cash records:
march 31 bank reconciliation
month of april results
instructions
(a)calculate the amount of the april 30:
1>.deposits in transit
2>.outstanding checks
(b)what is the april 30 adjusted cash balance? show all work.
21) the cost of land typically includes the purchase price and all of the following costs
except
a.grading, filling, draining, and clearing costs
b.street lights, sewers, and drainage systems cost
c.private driveways and parking lots
d.assumption of any liens or mortgages on the property
22) convertible bonds
a.have priority over other indebtedness
b.are usually secured by a first or second mortgage
c.pay interest only in the event earnings are sufficient to cover the interest
d.may be exchanged for equity securities
23) alex company prepares its statement of cash flows using the direct method for
operating activities. for the year ended december 31, 2013, alex company reports the
following activity:
what is the amount of cash payments to suppliers reported by alex company for the year
ended december 31, 2013?
a.$ 876,000
b.$ 924,000
c.$1,020,000
d.$ 780,000