The following information pertains to Rural Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
What is the return on common stockholders’ equity for Rural?
a. 4.8%
b. 8%
c. 37.5%
d. 16%
Answer:
If a corporation has only one class of stock, it is referred to as
a. classless stock.
b. preferred stock.
c. solitary stock.
d. common stock.
Answer:
Natural resources are generally shown on the balance sheet under
a. Intangibles.
b. Investments.
c. Property, Plant, and Equipment.
d. Stockholders’ Equity.
Answer:
Which one of the following is not an enhancing quality of useful information?
a. Timeliness
b. Understandability
c. Materiality
d. Comparability
Answer:
In analyzing the financial statements of a company, a single item on the financial
statements
a. should be reported in bold-face type.
b. is more meaningful if compared to other financial information.
c. is significant only if it is large.
d. should be accompanied by a footnote.
Answer:
Notification by the bank that a deposited customer check was returned NSF requires
that the company make the following adjusting entry:
a. Accounts Receivable
Cash
b. Cash
Accounts Receivable
c. Miscellaneous Expense
Accounts Receivable
d. No adjusting entry is necessary.
Answer:
On January 1, 2015, Cat Power Company reported stockholders’ equity of $705,000.
During the year, the company paid dividends of $30,000. At December 31, 2015, the
amount of stockholders’ equity was $825,000. What amount of net income or net loss
would the company report for 2015?
a. Net loss of $30,000
b. Net income of $90,000
c. Net income of $120,000
d. Net income of $150,000
Answer:
LIFO can be used
a. under neither GAAP nor IFRS.
b. under IFRS but not GAAP.
c. under GAAP but not IFRS.
d. under both GAAP and IFRS.
Answer:
Ethics are the standards of conduct by which one’s actions are judged as
a. right or wrong.
b. honest or dishonest.
c. fair or unfair.
d. All of these answers are correct.
Answer:
If prepaid expenses are initially recorded in expense accounts and have not all been
used at the end of the accounting period, the failure to make an adjusting entry will
cause
a. assets to be understated.
b. assets to be overstated.
c. expenses to be understated.
d. contra-expenses to be overstated.
Answer:
In large companies, the independent internal verification procedure is often assigned to
a. computer operators.
b. management.
c. internal auditors.
d. outside CPAs.
Answer:
The primary source of revenue for a wholesaler is
a. investment income.
b. service fees.
c. the sale of merchandise.
d. the sale of fixed assets the company owns.
Answer:
If a short-term debt investment is sold, the Investment account is
a. credited for the book value of the bonds at the sale date.
b. credited for the cost of the bonds at the sale date.
c. credited for the fair value of the bonds at the sale date.
d. debited for the cost of the bonds at the sale date.
Answer:
Depletion is
a. a decrease in market value of natural resources.
b. the amount of spoilage that occurs when natural resources are extracted.
c. the allocation of the cost of natural resources to expense.
d. the method used to record unsuccessful patents.
Answer:
In calculating cash flows from operating activities using the indirect method, a loss on
the sale of equipment will appear as a(n)
a. subtraction from net income.
b. addition to net income.
c. addition to cash flow from investing activities.
d. subtraction from cash flow from investing activities.
Answer:
Julie’s Boutique has total receipts for the month of $31,920 including sales taxes. If the
sales tax rate is 5%, what are Julie’s sales for the month?
a. $30,324
b. $30,400
c. $33,516
d. It cannot be determined.
Answer:
Gray Company uses the periodic inventory system to account for inventories.
Information related to Gray Company’s inventory at October 31 is given below:
Instructions
1> Show computations to value the ending inventory using the FIFO cost assumption if
550 units remain on hand at October 31.
2> Show computations to value the ending inventory using the weighted-average cost
method if 550 units remain on hand at October 31.
3> Show computations to value the ending inventory using the LIFO cost assumption if
550 units remain on hand at October 31.
Answer:
The accounting for short-term debt investments and for long-term debt investments is
similar.
Answer:
The information in a statement of cash flows helps investors and creditors assess the
company’s ability to pay dividends and meet obligations.
Answer:
Use of the LIFO inventory valuation method enables a company to report paper or
phantom profits.
Answer:
Available-for-sale securities are securities bought and held primarily for sale in the near
term to generate income on short-term price differences.
Answer:
The ledger accounts of the Fabulous Muscles Gym at June 30, 2015 are shown below:
Instructions
Prepare a trial balance with the ledger accounts arranged in the proper financial
statement order. Include the appropriate heading.
Answer:
Vertical analysis is a more sophisticated analytical tool than horizontal analysis.
Answer:
Foley Company applied FIFO to its inventory and got the following results for its
ending inventory.
The cost of purchasing units at year-end was DVRs $71, DVD players $68, and iPods
$78.
Instructions
Determine the amount of ending inventory at lower-of-cost-or-market.
Answer: