The excess of current assets over current liabilities is referred to as working capital.
a. True
b. False
Select the statement on which each of the items provided below would be reported.
a. Statement of retained earnings
b. Statement of stockholders’ equity
c. Items that may require reporting on either statement
d. Items not reported on either of the statements
Dividends for the period.
Indicate the type of each ratio listed below.
a. liquidity ratio
b. solvency ratio
c. profitability ratio
Gross profit ratio
A company’s weekly payroll amounts to $50,000 and payday for the week is every
Friday. Employees work five days per week, Monday through Friday. The appropriate
journal entry was recorded at the end of the accounting period, Monday, March 31,
2014. What amount is wages expense for April for the payday, Friday, April, 4, 2014?
a. $ -0-
b. $40,000
c. $10,000
d. $50,000
Which of the following statements is true regarding dividend income?
a. Dividend income is accrued at year-end.
b. Dividend income is reported on the income statement.
c. Dividend income appears in the stockholders’ equity section of the balance sheet.
d. Dividend income is recognized by companies that own debt securities.
Abilene Western Shop began business on January 1, 2015. The corporate charter
authorized issuance of 10,000 shares of $2 par value common stock and 4,000 shares of
$8 par value, 6% cumulative preferred stock. Abilene issued 2,400 shares of common
stock for cash at $20 per share on January 2, 2015. What effect does the entry to record
the issuance of stock have on total stockholders’ equity?
a. Increase of $4,800
b. Decrease of $4,800
c. Increase of $48,000
d. Decrease of $48,000
When using a work sheet:
a. an equal number of account titles are applicable to the Income Statement columns
and the Balance Sheet columns.
b. adjusting entries are not made since they appear on the work sheet.
c. net income appears in both the Income Statement debit column and the Balance Sheet
credit column.
d. the Income Statement column and Balance Sheet column of the work sheet eliminate
the need to prepare formal financial statements.
In the space provided, indicate the effect of the dividend transactions on each account
listed by writing the amount and whether the account would be increased or decreased.
The company has 10,000 shares of $1 par value, common stock authorized, and 8,000
shares issued. In instances where there is no effect on that account, place an X in the
box.
Cash flows from acquiring and selling products are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. distribution activities.
What are the effects on the accounting equation from the purchase of a short-term
investment?
a. Assets and stockholders’ equity decrease.
b. No effects-assets increase and decrease by the same amount.
c. Assets and liabilities decrease.
d. Stockholders’ equity decreases and liabilities increase.
Which one of the following is correct?
a. Inventory losses can be identified and controlled better under the perpetual system.
b. Inventory can only be sold at the end of an accounting period under the periodic
system.
c. There is no difference in cost to implement a perpetual as compared to a periodic
system.
d. The perpetual system eliminates the need for an annual inventory count.
Which one of the following is an assumption made in the preparation of financial
statements?
a. Financial statements are prepared for a specific entity that is distinct from the entity
owners.
b. Financial statements are prepared assuming that inflation has a distinct effect on the
monetary unit
c. Preparation of financial statements for a specific time period assumes that the balance
sheet covers a period of time.
d. Market values are always assumed to be irrelevant when preparing financial
statements.
Match the costs that might be included as part of the cost of inventory to the listed
accounting treatment. a. Add to inventory cost
b. Subtract from inventory cost
c. Not an inventory cost Invoice price paid for resale goods
Cash flow from operations to capital expenditures ratio
a. Interest expense
b. Income tax expense
c. Cash flow from operations before interest and tax payments
d. Cash paid for acquisitions
e. Cash flow from operations
f. Total dividends paid
g. Interest payments
h. Principal payments on debt
Carter, Inc. paid salaries expense of $292,000 during 2015. However, additional salaries
of $14,000 had been earned by employees, but not paid or recorded at December 31,
2015 by Carter. A) What is the effect on the accounting equation of the adjusting entry
necessary at December 31, 2015? B) Under which basis, cash, accrual, or both, would
the adjustment in part A be prepared? Explain. C) Under the accrual basis of
accounting, what is the total amount of salaries expense for the year ended December
31, 2015? D) Under the accrual basis of accounting, what is the total amount of salaries
payable to be reported at December 31, 2015? E) Under the cash basis of accounting,
what is the total amount of salaries expense for the year ending December 31, 2015? F)
Under the cash basis of accounting, what is the total amount of salaries payable at
December 31, 2015?
For each item listed, select the section of the balance sheet in which the item would be r
eported.
a. Current Assets
b. Property, Plant, and Equipment
c. Current Liabilities
d. Long-term Liabilities
e. Stockholders’ Equity
Equipment