1) goods held on consignment should be included in the consignors ending inventory.
2) stockholders equity is divided into two parts: common stock and retained earnings.
3) a plant asset must be fully depreciated before it can be removed from the books.
4) to be faithfully representative, accounting information should predict future events,
confirm prior expectations, and be reported on a timely basis.
5) the periodicity assumption states that the business will remain in operation for the
foreseeable future.
6) the following is selected information from c corporation for the fiscal year ending
october 31, 2011.
based on the accrual basis of accounting, what is c corporations net income for the year
ending october 31, 2011?
a.$102,000
b.$87,000
c.$86,000
d.$95,000
7) dole company reports a $32,000 increase in inventory and a $8,000 increase in
accounts payable during the year. cost of goods sold for the year was $240,000. using
the direct method of reporting cash flows from operating activities, cash payments
made to suppliers were
a.$240,000
b.$264,000
c.$200,000
d.$216,000
8) the number of years of income statement information to be presented is
a.2 years under both gaap and ifrs
b.3 years under both gaap and ifrs
c.2 years under gaap and 3 years under ifrs
d.3 years under gaap and 2 years under ifrs
9) a perpetual inventory system would most likely be used by a(n)
a.automobile dealership
b.hardware store
c.drugstore
d.convenience store
10) the land account would include all of the following costs except
a.drainage costs
b.the cost of building a fence
c.commissions paid to real estate agents
d.the cost of tearing down a building
11) the factor which determines whether or not goods should be included in a physical
count of inventory is
a.physical possession
b.legal title
c.management’s judgment
d.whether or not the purchase price has been paid
12) sams grocery store has the following policy. only one cashier can have access to a
cash drawer. which internal control principle supports this policy?
a.documentation procedures
b.segregation of duties
c.physical controls
d.establishment of responsibilities
13) when a company receives a utility bill but will not pay it right away, it should
a.debit utilities expense and credit accounts receivable.
b.debit utilities expense and credit accounts payable.
c.debit accounts payable and credit utilities expense.
d.make no entry until the bill is paid.
14) use the following data to calculate the liquidity and profitability ratios listed below.
average common shares outstanding$10,000current liabilities$100,000
capital expenditures20,000net income21,000
cash provided by operations28,000net sales150,000
dividends paid5,000total liabilities105,000
current assets180,000total assets210,000
instructions
compute the following:
(a)current ratio.(d)debt to total assets ratio.
working capital.(e)free cash flow.
(c)earnings per share.
15) the scarlet pages, a semi-professional hockey team, prepare financial statements on
a monthly basis. their season begins in october, but in september the team engaged in
the following transactions:
(a)paid $180,000 to oklahoma city as advance rent for use of oklahoma city arena for
the six-month period october 1 through march 31.
(b)collected $600,000 cash from sales of season tickets for the team’s 30 home games.
this amount was credited to unearned ticket revenue.
(c) during the month of october, the scarlet pages played five home games.
instructions:
prepare the adjusting entries required at october 31 for the transactions above.
16) which of these is not a liquidity ratio?
a.current ratio
b.asset turnover ratio
c.inventory turnover ratio
d.receivables turnover ratio
17) mitchell, inc. has the following income statement (in millions):
using vertical analysis, what percentage is assigned to gross profit?
a.40%
b.100%
c.cant be computed
d.60%
18) darting company purchased a computer system for $5,400 on january 1, 2011. the
company expects to use the computer system for 3 years. it has no salvage value.
monthly depreciation expense on the asset is:
a.$0
b.$150
c.$1,800
d.$5,400
19) gomez corporation issues 800, 10-year, 8%, $1,000 bonds dated january 1, 2012, at
96. the journal entry to record the issuance will show a
a.debit to cash of $800,000
b.credit to discount on bonds payable for $32,000
c.credit to bonds payable for $768,000
d.debit to cash for $768,000
20) a very small company would have the most difficulty in implementing which of the
following internal control activities?
a.separation of duties
b.limited access to assets
c.periodic independent verification
d.sound personnel procedures
21) gaaps provision for ownership of goods (goods-in-transit or consigned goods), as
well as which costs to include in inventory, as compared to ifrs are:
22) a survey of major u.s. companies revealed that 77% of those companies used either
lifo or fifo cost flow methods, while 19% used average cost, and only 4% used other
methods.
requirement
provide brief, yet concise responses to the following questions.
23) frye company issued $500,000, 10%, 10-year bonds on january 1, 2012, at 105.
interest is payable annually. frye uses the effective-interest method of amortization and
has a calendar year end and the bonds were issued for an effective interest rate of 8%.
instructions
prepare all journal entries made in 2012 related to the bond issue.
24) on october 31 the stockholders’ equity section of eaton company’s balance sheet
consists of common stock $548,000 and retained earnings $400,000. eaton is
considering the following two courses of action: (1) declaring a 5% stock dividend on
the 60,000 $12 par value shares outstanding or (2) affecting a 3-for-1 stock split that
will reduce par value to $4 per share. the current market price is $15 per share.
instructions
prepare a tabular summary of the effects of the alternative actions on the company’s
stockholders’ equity and outstanding shares. use these column headings: before action,
after stock dividend, and after stock split.
25) linda merton asks, ‘since stock dividends don’t change anything, why declare
them?” what is your answer to linda?
26) if bonds were issued at a premium, then the contractual rate of interest was
_______________ than the market rate of interest.
27) the revenue recognition principle dictates that revenue be recognized in the
accounting period in which it is earned.
28) flint hills trading company’s most recent financial statements showed dismal
performance. there was a net loss of $10,000 and the statement of cash flows showed a
net cash decrease in all categories. the company president called all the managers
together and asked them to do all they could to make sure the next quarter’s
performance was better.
mark menke, manager of the manufacturing division, sold off old manufacturing
equipment. he also reclassified several workers to part-time (30 hours per week) and
hired additional temporary workers to take up the slack. this saved the company money,
since part-time workers do not have the same insurance and other benefits as full-time
workers.
jeff jurgens, financial manager, immediately suspended payments on all accounts except
those on which interest would accrue. he also instituted aggressive collection
procedures.
1>were mark menke’s actions ethical? explain.
2>were jeff jurgens’s actions ethical? explain.
3>were the company president’s actions ethical? explain.
29) alice gray believes revenues from credit sales may be earned before they are
collected in cash. do you agree? explain.
30)
miller company had total operating expenses of $135,000 in 2012, which included
depreciation expense of $25,000. also during 2012, prepaid expenses increased by
$9,000 and accrued expenses decreased by $5,500.
instructions
calculate the amount of cash payments for operating expenses in 2012 using the direct
method.