1) Orlando Corporation incorporated on January 2, 2015. During 2015, Orlando had the
following transactions:
issued 30,000 shares of common stock at $25 per share. The par value per share is $1.
purchased 5,000 shares of treasury stock at $28 per share
had net income of $400,000.
What is the total amount of stockholders’ equity as of December 31, 2015?
A) $610,000
B) $750,000
C) $1,010,000
D) $1,150,000
2) The income statement approach to estimating uncollectible accounts is called the
________ method. The balance sheet approach to estimating uncollectible accounts is
called the ________ method.
A) direct write-off; allowance
B) allowance; direct write-off
C) percent-of-sales; aging-of-receivables
D) aging-of-receivables; percent-of-sales
3) If the equity method is used to account for a long-term investment in common stock,
cash dividends received from the investee are recorded by the investor as:
A) a debit to Equity-Method Investment and a credit to Equity-Method Investment
Revenue
B) a debit to Cash and a credit to Dividend Revenue
C) a debit to Dividend Receivable and a credit to Dividend Revenue
D) a debit to Cash and a credit to Equity-Method Investment
4) The two most common types of fraud impacting the financial statements are:
A) fraudulent financial reporting and e-commerce fraud
B) misappropriation of assets and embezzlement
C) fraudulent financial reporting and misappropriation of assets
D) cooking the books and fraudulent financial reporting
5) Realized gains and losses from long-term available-for-sale investments arise from:
A) the purchase of an investment
B) the sale of the investment
C) changes in the fair value of the investment
D) investor’s share of investee’s net income or net loss
6) At the end of the year, Seidner Company has the following information available:
The company uses the percent-of-sales method to estimate bad debts and has not
prepared the adjusting journal entry for Uncollectible-Account Expense at year end.
What does the debit balance in the Allowance for Uncollectible Accounts indicate?
A) The company overestimated the amount of uncollectible accounts at the end of the
prior accounting period
B) The company underestimated the amount of uncollectible accounts at the end of the
prior accounting period
C) Write-offs of uncollectible accounts increased dramatically in the current accounting
period
D) B and C
7) A consolidated balance sheet excludes:
A) a subsidiary’s stockholders’ equity
B) a parent company’s Investment in Subsidiary account
C) intercompany note receivable and note payable
D) all of the above
8) When preparing the financial statements for a company:
A) the report format of the income statement lists liabilities before assets
B) the account format for the balance sheet lists the assets on the left and liabilities and
stockholders’ equity on the right
C) the multiple-step balance sheet lists assets in order of their liquidity
D) the single-step income statement reports a number of subtotals
9) Which of the following line items are reported net of tax on the income statement?
A) operating loss of discontinued operations
B) loss on sale of discontinued segment
C) extraordinary loss due to flood damage in factory in Phoenix, Arizona
D) all of the above
10) Mike’s Pharmacy sold merchandise with a selling price of $2,500 to customers for
cash. They also collected sales taxes of $300 for the day. The pharmacy uses the
perpetual inventory system but ignore Cost of Goods Sold. The journal entry to record
this information has:
A) debit to Cash of $2,800
B) debit to Sales Tax Expense $300
C) credit to Sales $2,800
D) debit to Sales Tax Payable $300
11) A journal entry that debits Cash and credits Accounts Receivable indicates that:
A) payment was received on account
B) payment was made on account
C) revenue increased
D) revenue decreased
12) The following accounts and balances are taken from Moore Company’s adjusted
trial balance:
What is the ending balance in Retained Earnings after the closing entries are
completed?
A) $8,740
B) $11,140
C) $19,240
D) $39,040
13) Given the following data, calculate the cost of goods sold using the average-cost
method. Round your calculations to two decimal places.
A) $420
B) $651
C) $840
D) $924
14) A chart of accounts:
A) is used by an organization to determine the balance in all of their accounts
B) lists all of the accounts of an organization in alphabetical order
C) must be the same for all organizations
D) lists all of an organization’s accounts and account numbers
15) The authority to declare a dividend lies with the:
A) Chief Financial Officer
B) President of the company
C) Chief Executive Officer
D) Board of Directors
16) When an adjustment is made for prepaid rent:
A) an asset increases and an expense decreases
B) one asset increases and another decreases
C) an asset decreases and an expense increases
D) a liability decreases and an expense decreases
17) Cost of goods sold:
A) is considered a selling expense
B) is the direct cost of the product sold
C) is classified as revenue on the income statement
D) is the same as gross profit
18) Scott Walker Company has the following data available for the past year:
Industry Averages available are:
How do the inventory turnover and gross profit percentage for Scott Walker Company
compare to the industry averages for the same ratios?
A) Walker Company is superior on both measures
B) Walker Company is inferior on both measures
C) Walker Company is inferior on one measure and superior on the other measure
D) There is not enough information
19) On June 1, Neighbor Company purchased inventory on account with a cost of
$5,000. The credit terms were 2/10, net 30. On June 2, Neighbor Company returned 50
percent of the inventory. Neighbor Company uses the perpetual inventory system. On
June 8, Neighbor Company paid for the inventory. What journal entry did Neighbor
Company prepare on June 8?
A) debit Purchase Discount for $50, debit Cash for $2,450 and credit Accounts Payable
for $2,500
B) debit Accounts Payable for $2,500 and credit Cash for $2,500
C) debit Accounts Payable for $2,500, credit Purchase Discount for $50 and credit Cash
for $2,450
D) debit Accounts Payable for $2,500, credit Inventory for $50 and credit Cash for
$2,450
20) Schmid Corporation issues $500,000, 10%, 5-year bonds on January 1, 2014 for
$479,000. Interest is paid semiannually on January 1 and July 1. If Schmid uses the
straight-line method of amortization of bond discount, the amount of bond interest
expense on July 1, 2014 is:
A) $22,900
B) $25,000
C) $27,100
D) $52,100
21) The book value of a plant asset is defined as:
A) historical cost minus residual value
B) historical cost minus accumulated deprecation
C) current sales value minus historical cost
D) historical cost minus annual maintenance expense
22) An investor purchased bonds and intends to hold them until the maturity date which
is 10 years into the future. The bonds were purchased at a discount and pay interest
semiannually. Which journal entry or entries is(are) needed at each interest date?
A) receipt of interest revenue only
B) amortization of bond discount only
C) amortization of bond premium only
D) A and B
23) Under U.S. GAAP, inventories are reported on the balance sheet at:
A) historical cost only
B) current replacement cost only
C) net realizable value only
D) A and B
24) The net loss for a company is reported on the:
A) Statement of Cash Flows
B) Statement of Retained Earnings
C) Income Statement
D) all of the above
25) Current liabilities as reported on the balance sheet do NOT include:
A) current maturities of long-term debt
B) income taxes payable
C) salaries payable
D) treasury stock
26) On December 2, a customer returned merchandise with a selling price of $500
purchased on account to a department store. Ignoring Cost of Goods Sold, what journal
entry did the department store prepare?
A) Debit Sales Revenue for $500 and credit Accounts Receivable for $500
B) Debit Sales Revenue for $500 and credit Cash for $500
C) Debit Sales Revenue for $500, credit Sales Discount for $10, and credit Cash for
$490
D) Debit Sales Returns and Allowances for $500 and credit Accounts Receivable for
$500
27) Using the indirect method to prepare the statement of cash flows, dividends paid
during the year are:
A) subtracted from net income in the operating activities section
B) added to net income in the operating activities section
C) shown as a cash outflow in the financing activities section
D) shown as a cash outflow in the investing activities section
28) The entry to record the purchase of supplies on account would include a credit to:
A) Supplies
B) Accounts Payable
C) Supplies Expense
D) Cash