1) A stock split has no effect on the total of any account in stockholders equity.
2) The closing entry for dividends includes a debit to the Dividends account and a credit
to Retained Earnings.
3) Regarding a contingent liability, when no amount within a range of potential losses
appears more likely than others, we record the maximum amount in the range.
4) Unrealized gains and losses from changes in the fair value of available-for-sale
securities are reported as part of current net income.
5) Under the direct write-off method, bad debt expense is recorded at the time accounts
are known to be uncollectible.
6) Monthly installment payments on a note payable include both an amount that
represents interest and an amount that represents a reduction of the outstanding loan
balance.
7) Using the first-in, first-out method (FIFO), the first units purchased are assumed to
be the first ones sold.
8) Simple interest is interest earned on the initial investment only.
9) We record a long-term asset at its cost less all expenditures necessary to get the asset
ready for use.
10) When a firm develops a trademark internally through advertising, it does not record
the advertising costs as an intangible asset, but rather expenses them in the income
statement.
11) A framework for designing an internal control system is provided by the Financial
Accounting Standards Board (FASB).
12) Common stock is listed before preferred stock in the balance sheet.
13) The percentage-of-credit-sales method (income statement method) is allowed only
if amounts do not differ significantly from estimates using the
percentage-of-receivables method.
14) The indirect method begins with net income, while the direct method considers each
of the individual accounts that make up net income.
15) The adjusting entry for an accrued expense always includes a debit to an expense
account and a credit to a liability account.
16) Land improvements are recorded separately from the land itself because, unlike
land, these assets are subject to depreciation.
17) If you put $300 into a savings account that pays annual compound interest of 10%
per year and then withdraw the money two years later, you will earn interest of $63.
18) Because the carrying value of bonds purchased at a discount increases over time,
interest revenue will also increase each semi-annual interest period.
19) The stated interest rate is the rate quoted in the bond contract used to calculate the
cash payments for interest.
20) Assuming rising costs, the switch from LIFO to FIFO or average cost would most
likely have what effect(s)?
a. Increase reported net income in the income statement
b. Decrease tax obligations to the Internal Revenue Service (IRS)
c. Increase reported net income and tax obligations
d. Decrease reported net income and tax obligations
21) If the liabilities of a company increased by $55,000 during a month and the
stockholders equity decreased by $21,000 during that same month, did assets increase
or decrease and by how much?
a. $34,000 increase
b. $55,000 increase
c. $34,000 decrease
d. $76,000 increase
22) Listed below are ten terms followed by a list of phrases that describe or characterize
five of the terms. Match each phrase with the best term placing the letter designating
the term in the space provided.
a. Ending inventory
b. Freight-in
c. Cost of goods sold
d. LIFO conformity rule
e. LIFO
f. Freight-out
g. LIFO reserve
h. Specific identification
i. FIFO
j. Average cost
_____ Cost of inventory sold during the period.
23) For which of the following topics is accounting under both U.S. GAAP and IFRS
essentially the same?
a. Receivables
b. Long-term assets
c. Inventory
d. Research and development expenditures
24) The Titan retires a $20 million bond issue when the carrying value of the bonds is
$18 million, but the market value of the bonds is $23 million. The entry to record the
retirement will include:
a. A debit of $5 million to a loss account
b. A credit of $5 million to a gain account
c. No gain or loss on retirement
d. A credit to cash for $18 million
25) Listed below are four bond terms followed by a list of definitions. Match (by letter)
the bond terms with their definitions. Each letter is used only once.
Definitions
a. Allows the issuer to pay off the bonds early at a fixed price.
b.Allows the investor to transfer each bond into shares of common stock.
c.Sale of debt securities directly to a single investor.
d.Includes underwriting, legal, accounting, registration, and printing fees.
26) The current ratio is calculated as:
a. Current assets divided by noncurrent assets
b. Current assets divided by current liabilities
c. Current liabilities divided by noncurrent liabilities
d. Current liabilities divided by current assets
27) An alternative form of the accounting equation is:
a. Net Income = Revenues Expenses
b. Stockholders Equity = Assets + Liabilities
c. Assets = Liabilities Stockholders Equity
d. Assets Liabilities = Stockholders Equity
28) Listed below are five terms followed by a list of phrases that describe or
characterize the terms. Match each phrase with the best term placing the letter
designating the term in the space provided.
a. Gross profit
b. Net income
c. Inventory turnover ratio
d. Operating income
e. Income before income taxes
_____ Equals operating income plus nonoperating revenues less nonoperating
expenses.
29) The following events pertain to Bills Company:
December 28, 2015 – Bills was contacted by a customer for possible accounting and tax
services.
December 30, 2015 – Bills signed a formal agreement with the customer to provide
accounting and tax services in 2016.
January 4, 2016 – The customer paid $1,000 in advance for the services to be provided
by Bills Company.
January 11, 2016 – Bills provided accounting and tax services to the customer.
Using cash-basis accounting, on which date should Bills Company record revenue for
the accounting and tax services?
a. December 30, 2015
b. December 31, 2015
c. January 4, 2016
d. January 11, 2016
30) A company receives a $50,000 cash deposit from a customer on October 15 but will
not provide services until November 20 . Which of the following statements is True?
a. The company records service revenue on October 15
b. The company records cash collection November 20
c. The company records unearned revenue on October 15
d. The company records nothing on October 15
31) A customer purchased a $2,000 item at ApplianceWorld, paying with a credit card.
ApplianceWorld is charged a 2% fee by the credit card company. When recording this
sale, ApplianceWorld would:
a. Debit Accounts Receivable for $2,000
b. Credit Sales Revenue for $2,000
c. Credit Sales Revenue for $1,960
d. Credit Unearned Revenue for $2,000
32) Which of the following is an operating activity?
a. Issuing common stock
b. Paying dividends
c. Borrowing cash from a bank to acquire a factory
d. Paying electricity bills for the month
33) Listed below are ten terms followed by a list of phrases that describe or characterize
five of the terms. Match each phrase with the best term placing the letter designating
the term in the space provided.
a. Accounts receivable
b. Allowance method
c. No effect
d. Direct write-off method
e. Net realizable value
f. Aging method
g. Bad debt expense
h. Receivables written off
i. Decrease assets and increase expenses
j. Allowance for uncollectible accounts
_____ Accounts receivable less allowance for uncollectible accounts.
34) In a periodic inventory system, at the time of a sale the cost of inventory sold is:
a. Debited to Accounts Receivable
b. Credited to Cost of Goods Sold
c. Debited to Cost of Goods Sold
d. Not recorded at this time
35) Given the information below, what is the gross profit?
a. $250,000
b. $70,000
c. $220,000
d. $50,000
36) Tom’s Textiles shipped the wrong material to a customer, who refused to accept the
order. Upon receipt of the material, Tom’s would credit Accounts Receivable and debit:
a. Sales Revenue
b. Sales Discounts
c. Sales Returns
d. Sales Allowances
37) Stimpleton Company engages in the following cash payments:
What is the total amount of cash paid for operating activities? a. $6,000
b. $2,000
c. $7,000
d. $1,500
38) The following financial information is from Shovels Construction Company:
What is the amount of current assets, assuming the accounts above reflect normal
activity?
a. $20,000
b. $60,000
c. $140,000
d. $175,000
39) On December 31, 2015, Coolwear Inc. had balances in Accounts Receivable and
Allowance for Uncollectible Accounts of $48,400 and $940, respectively. During 2016,
Coolwear wrote off $820 in accounts receivable and determined that there should be an
allowance for uncollectible accounts of $1,140 at December 31, 2016 . Bad debt
expense for 2016 would be:
a. $320
b. $1,140
c. $820
d. $1,020
40) Which of the following is recorded by a credit to Accounts Receivable?
a. Sale of inventory on account
b. Estimating the annual allowance for uncollectible accounts
c. Estimating annual sales returns
d. Write-offs of bad debts
41) Having management periodically determine whether the amount of physical assets
of the company match the accounting records is an example of which detective control?
a. Separation of duties
b. Reconciliations
c. Performance reviews
d. Employee management
42) During periods when inventory costs are rising, cost of goods sold will most likely
be:
a. Higher under FIFO than LIFO
b. Higher under FIFO than average cost
c. Lower under average cost than LIFO
d. Lower under LIFO than FIFO
43) Allowance for Uncollectible Accounts is:
a. An expense account
b. A contra asset account
c. A contra revenue account
d. A liability account
44) The following information pertains to Julia & Company:
March 1 Beginning inventory = 30 units @ $5
March 3 Purchased 15 units @ $4
March 9 Sold 25 units @ $8
What is the cost of goods sold for Julia & Company assuming it uses LIFO?
a. $125
b. $100
c. $110
d. $85
45) When a company delivers a product or service for which a customer has previously
paid, the company records the following:
a.A debit to a revenue account and a credit to a liability account
b.A debit to a revenue account and a credit to an asset account
c.A debit to an asset account and a credit to a revenue account
d.A debit to a liability account and a credit to a revenue account
46) Which accounting principle does the direct write-off method violate?
a. Cost
b. Realization
c. Revenue recognition
d. Matching
47) Listed below are five terms listed in alphabetical order followed by a list of phrases
that describe or characterize the terms. Match each phrase with the best term placing the
letter designating the term in the space provided.
a. Aggressive accounting practices
b. Conservative accounting practices
c. Discontinued operation
d. Extraordinary item
e. Quality of earnings
Phrases:
_____ An event that is (1) unusual in nature and (2) infrequent in occurrence.
_____ The sale or disposal of a significant component of a companys operations.
_____ Refers to the ability of reported earnings to reflect the companys True earnings,
as well as the usefulness of reported earnings to predict future earnings.
_____ Practices that result in reporting lower income, lower assets, and higher
liabilities.
_____ Practices that result in reporting higher income, higher assets, and lower
liabilities.
48) A trial balance can best be explained as a list of:
a. The income statement accounts used to calculate net income
b. Revenue, expense, and dividend accounts used to show the balances of the
components of retained earnings
c. The balance sheet accounts used to show the equality of the accounting equation
d. All accounts and their balances at a particular date
49) What is the correct order to present the following items on the income statement?
a. Other revenues and expenses, income tax expense, discontinued operations,
extraordinary items
b. Other revenues and expenses, income tax expense, extraordinary items, discontinued
operations
c. Discontinued operations, extraordinary items, other revenues and expenses, income
tax expense
d. Discontinued operations, extraordinary items, income tax expense, other revenues
and expenses
50) The depreciable cost used in calculating depreciation expense is:
a.Its service life
b.The amount allowable under tax depreciation methods
c.The difference between its replacement value and cost
d.The assets cost minus its estimated residual value
51) Listed below are six terms followed by a list of phrases that describe or characterize
the terms. Match each phrase with the best term by placing the letter designating the
term in the space provided.
a. Bank service fees
b. Deposits outstanding
c. Interest earned
d. NSF checks
e. Company error
f. Checks outstanding
____ Cash receipts received by the company but not yet recorded by the bank.
52) In a period when inventory costs are falling, the lowest taxable income is most
likely reported by using the inventory method of:
a. Weighted-average
b. LIFO
c. Moving-average
d. FIFO
53) Given the items below, which of the following is a subtraction from net income to
arrive at Operating Cash Flows using the indirect method?
a. II only
b. IV only
c. I and II
d. II and III
54) Bad Brads BBQ purchased a piece of equipment by paying $5,000 cash. They also
incurred a shipping cost of $400 to get the equipment to its factory. The fair value of
this equipment is $7,000. For what amount should Bad Brads BBQ record the
equipment?
a. $5,000
b. $5,400
c. $7,000
d. $7,400
55) Listed below are five terms followed by a list of phrases that describe or
characterize the terms. Match each phrase with the best term by placing the letter
designating the term in the space provided.
a. Cash equivalent
b. Bank reconciliation
c. Petty cash
d. Debit card
e. Credit card
____ Matches the balance of cash in the bank account with the balance of cash in
the companys own records.
56) The balance of Retained Earning at the end of the year represents:
a. Current years profits less payments to owners
b. Total earnings less payments to owners over the life of the company
c. Total contributions from owners less withdrawals over the life of the company
d. Total earnings over the life of the company
57) Record the following transactions for Acme Builders:
(a) Purchase office supplies on account, $1,200.
(b) Provide services to customers for cash, $2,500.
(c) Pay $1,100 in salaries for the current month.
58) Which of the following is the most likely to have voting rights?
a. Common Stock
b. Preferred Stock
c. Bonds
d. They all have similar voting rights
59) At the end of the current period, Maltese, Inc. reports the following amounts: Assets
= $50,000; Liabilities = $28,000; Dividends = $4,000; Revenues = $22,000; Expenses =
$16,000. Calculate net income and stockholders equity at the end of the period.
60) The financial statements of Trail Apparel include the following selected data (in
millions):
1> Calculate the return on equity for 2015 .
2>Calculate the return on the market value of equity for 2015 .
3>Calculate the price-earnings ratio for 2015 .
61) On September 8, a company provides services on account to a customer for $1,500,
terms 2/10, n/30. The customer pays for those services on September 15 . Record the
transactions for the company when the services are provided on September 8 and when
the cash is collected on September 15 .
62) Pizza Pier issues 7%, 10-year bonds with a face amount of $80,000 for $85,951 on
January 1, 2015 . The market interest rate for bonds of similar risk and maturity is 6%.
Interest is paid semiannually on June 30 and December 31 .
1> Record the bond issue.
2> Record the first interest payment on June 30, 2015 .
63) A company has the following balances on December 31, 2015, after year-end
adjustments: Accounts Receivable = $62,000; Allowance for Uncollectible Accounts =
$6,000. Calculate the net realizable value of accounts receivable.
64) A companys bank statement shows a cash balance of $4,230. Comparing the
companys cash records with the monthly bank statement reveals several additional cash
transactions such as checks outstanding of $3,880, deposits outstanding of $1,230, NSF
check of $300, and service fee of $50. Calculate the correct balance of cash.
65) Northwest Catering owns and operates several restaurant services in Oregon,
Washington, and Idaho. One restaurant chain has experienced sharply declining profits.
The companys management has decided to test the operational assets for possible
impairment. The relevant information for these assets is presented below:
Determine the amount of the impairment loss, if any.