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1) each bondholder may vote for the board of directors in proportion to the number of
bonds held.
2) in general, the fasb indicates that most assets must follow the fair value principle.
3) the calculation of interest to be paid each interest period in connection with a bond
payable is not influenced by any premium or discount upon issuance.
4) trading securities are valued on the balance sheet at market value.
5) with an interest-bearing note, the amount of cash received upon issuance of the note
generally exceeds the note's face value.
6) revenue increases stockholders equity and should be recorded whenever cash is
received from customers.
7) management of a business enterprise is the major external user of information.
8) scott company owns 30% interest in the stock of rhodes corporation. during the year,
rhodes pays $100,000 in dividends to scott, and reports a net loss of $250,000. scott
companys investment in rhodes will affect scott net income by a
a.$100,000 increase
b.$75,000 increase
c.$75,000 decrease
d.$100,000 decrease
9) which of the following statements is not true regarding the sarbanes-oxley act (sox)
of 2002?
a.the act calls for increased oversight responsibilities for boards of directors
b.the act has resulted in increased penalties for financial fraud by top management
c.the act calls for decreased independence of outside auditors reviewing corporate
financial statements
d.the act is meant to decrease the likelihood of unethical corporate behavior
10) in the first month of operations, the total of the debit entries to the cash account
amounted to $1,000 and the total of the credit entries to the cash account amounted to
$600. the cash account has a
a.$600 credit balance.
b.$1,000 debit balance.
c.$400 debit balance.
d.$600 credit balance.
11) restricted cash should be:
a.always reported as a noncurrent asset
b.reported separately on the income statement
c.reported separately on the balance sheet
d.always reported as a current asset
12) the practice of large corporations reporting all financial statement amounts to the
nearest thousand dollars is an example of the application of
a.consistency
b.periodicity
c.full disclosure
d.materiality
13) a company regularly sells its receivables to a factor who assesses a 2% service
charge on the amount of receivables purchased. which of the following statements is
true for the seller of the receivables?
a.the loss section of the income statement will increase each time receivables are sold
b.the credit to accounts receivable is less than the debit to cash when the accounts are
sold
c.selling expenses will increase each time accounts are sold
d.the other expense section of the income statement will increase each time accounts
are sold
14) the procedure of transferring journal entries to the ledger accounts is called
a.journalizing.
b.analyzing.
c.reporting.
d.posting.
15) which of the following accounts follows the rules of debit and credit in relation to
increases and decreases in the opposite manner?
a.prepaid insurance and dividends
b.dividends and interest revenue
c.interest payable and common stock
d.advertising expense and land
16) the general ledger of the alexander company provides the following information:
the company's net sales for the year was $2,000,000 and cost of goods sold amounted to
$1,700,000.
instructions
compute the following:
(a)cash receipts from customers
(b)cash payments to suppliers
17) which of the following statements is true?
a.due to its liquid nature, cash is the easiest asset to steal
b.a good system of internal control will ensure that employees will not be able to steal
cash
c.it takes two or more employees working together to be able to steal cash
d.all statements are true
18) which of the following is not a true statement about a multiple-step income
statement?
a.operating expenses are often classified as selling and administrative expenses
b.there may be a section for non-operating activities
c.there may be a section for operating assets
d.there is a section for cost of goods sold
19) a company can change to a new method of accounting if management can justify
that the new method results in
a.more meaningful financial information
b.a higher net income
c.a lower net income for tax purposes
d.less likelihood of clerical errors
20) as a recent graduate in accounting, and the financial director of a political candidate
in a current election, you have been asked to explain many questions concerning how
governmental accounting differs from corporate accounting.
instructions:
(a) discuss the differences between cash basis and accrual basis accounting.
(b) prepare a memo to your candidate explaining why governmental entities favor the
cash basis of accounting.
21) dikin company is about to issue $300,000 of 5-year bonds, with a contract rate of
interest of 8%, payable semiannually. the discount rate for such securities is 10%. how
much can dikin expect to receive from the sale of these bonds?
a.$276,834
b.$300,000
c.$324,332
d.none of the above
22) if a company sells its accounts receivables to a factor
a.the seller pays a commission to the factor
b.the factor pays a commission to the seller
c.there is a gain on the sale of the receivables
d.the seller defers recognition of sales revenue until the account is collected
23) finney inc. had these transactions pertaining to investments in common stock:
instructions
journalize the transactions.
24) erin corporation purchases $400 of merchandise on credit. using the periodic
inventory approach, erin would record this transaction as:
25) on october 1, sam's painting service borrows $80,000 from national bank on a
3-month, $80,000, 4% note. what entry must sam's painting service make on december
31 before financial statements are prepared?
26) arnold pharmacy reported cost of goods sold as follows:
arnold made two errors:
(1)2011 ending inventory was overstated by $8,000.
(2)2012 ending inventory was understated by $15,000.
instructions
assuming the errors had not been corrected, indicate the dollar effect that the errors had
on the items appearing on the financial statements listed below. also indicate if the
amounts are overstated (o) or understated (u).
27) julie lambert has a large consulting practice. new clients are required to pay
one-half of the consulting fees up front. the balance is paid at the conclusion of the
consultation. how does lambert account for the cash received at the end of the
engagement?
28) hoerner company had the following transactions pertaining to debt securities held as
an investment.
instructions
journalize the purchase and the receipt of interest. assume no interest has been accrued.
29) using _______________ documents is a control measure that helps to prevent a
transaction from being recorded more than once or to prevent the transactions from not
being recorded.
