1) the acquisition of a building by issuing bonds would be considered an investing and
financing activity that did not affect cash.
2) land improvements are generally charged to the land account.
3) under the equity method, the investment in common stock is initially recorded at
cost, and the stock investments account is adjusted annually.
4) if $180,000, 6%, bonds are issued on january 1, and pay interest annually, the
amount of interest paid will be $10,800.
5) in a monthly mortgage payment, the same amount is recorded as interest expense as
in the previous months payment.
6) under the perpetual system, cash freight costs incurred by the buyer for the
transporting of goods is recorded in which account?
a.freight expense
b.freight-in
c.inventory
d.freight-out
7) which of the following items should be classified as an extraordinary item on an
income statement?
a.gain on the sale of property, plant or equipment
b.loss due to expropriation of property by a foreign government
c.loss due to discontinued operations
d.excess of the selling price over the cost of treasury stock
8) in the first month of operations, the total of the debit entries to the cash account
amounted to $1,400 and the total of the credit entries to the cash account amounted to
$800. the cash account has a
a.$800 credit balance.
b.$1,400 debit balance.
c.$600 debit balance.
d.$600 credit balance.
9) sams pest control products has the following information available.
what is the cash debt coverage ratio?
a..375 times
b.1.33 times
c..600 times
d.1.625 times
10) at march 1, 2011, candy inc. had supplies on hand of $1,500. during the month,
candy purchased supplies of $2,900 and used supplies of $1,800. the march 31 balance
sheet should report what balance in the supplies account?
a.$1,500
b.$2,600
c.$1,800
d.$2,900
11) under the accrual basis of accounting:
a.cash must be received before revenue is recognized
b.net income is calculated by matching cash outflows against cash inflows
c.events that change a company’s financial statements are recognized in the period they
occur rather than in the period in which cash is paid or received
d.the ledger accounts must be adjusted to reflect a cash basis of accounting before
financial statements are prepared under generally accepted accounting principles
12) the periodicity assumption states
a.the business will remain in operation for the foreseeable future
b.the life of a business can be divided into artificial time periods and that useful reports
covering those periods can be prepared
c.every economic entity can be separately identified and accounted for
d.only those things that can be expressed in money are included in the accounting
records
13) burke company purchases land for $85,000 cash. burke assumes $2,500 in property
taxes due on the land. the title and attorney fees totaled $1,000. burke has the land
graded for $2,200. they paid $10,000 for paving of a parking lot. what amount does
burke record as the cost for the land?
a.$88,200
b.$100,700
c.$90,700
d.$85,000
14) when a perpetual inventory system is used, which of the following is a purpose of
taking a physical inventory?
a.to check the accuracy of the perpetual inventory records
b.to determine cost of goods sold for the accounting period
c.to compute inventory ratios
d.all are a purpose of taking a physical inventory when a perpetual inventory system is
used
15) positive operating income will result if gross profit exceeds
a.costs of goods sold
b.selling expenses
c.cost of goods sold plus operating expenses
d.operating expenses
16) use the following data to calculate the current ratio.
a.1.85 : 1
b.2.92 : 1
c.3.45 : 1
d.1.38 : 1
17) a patent
a.has a legal life of 20 years
b.is not amortized
c.can be renewed indefinitely
d.is rarely subject to litigation because it is an exclusive right
18) ellerman company had the following transactions pertaining to its short-term stock
investments.
instructions
(a)journalize the transactions.
(b)indicate the income statement effects of the transactions.
19) the primary difference between accrued revenues and unearned revenues is that
accrued revenues have:
a.not been earned and accrued revenues have been
b.been paid and unearned revenues have not
c.been recorded and unearned revenues have not
d.not been recorded and unearned revenues have
20) when an investor owns between 20% and 50% of the common stock of a
corporation, it is generally presumed that the investor
a.has insignificant influence on the investee and that the cost method should be used to
account for the investment
b.should apply the cost method in accounting for the investment
c.will prepare consolidated financial statements
d.has significant influence on the investee and that the equity method should be used to
account for the investment
21) under the allowance method of accounting for bad debts, why must uncollectible
accounts receivable be estimated at the end of the accounting period?
a.to allow the collection department to schedule work for the next accounting period
b.to determine the gross realizable value of accounts receivable
c.the irs rules require the company to make the estimate
d.to match bad debt expense to the period in which the revenues were earned
22) which of the following is a constraint in accounting?
a.comparability
b.materiality
c.consistency
d.relevance
23) if the proceeds from the sale of a plant asset exceeds its ______________, a gain on
disposal will occur.
24) match the statements below with the appropriate terms by entering the appropriate
letter code in the spaces provided.
statements:
1>a revenue not yet earned; collected in advance.
2>office supplies on hand that will be used in the next period.
3>subscription revenue collected; not yet earned.
4>rent not yet collected; already earned.
5>an expense incurred; not yet paid or recorded.
6>a revenue earned; not yet collected or recorded.
7>an expense not yet incurred; paid in advance.
8>interest expense incurred; not yet paid.
25) adjusting entries are recorded in the general journal but are not posted to the
accounts in the general ledger.
26) the transactions of the speedy delivery service are recorded in the general journal
below. you are to post the journal entries to the accounts in the general ledger. after all
entries have been posted, you are to prepare a trial balance on the form provided.
general ledger
27) faster company uses the periodic inventory method and had the following inventory
information available:
a physical count of inventory on december 31 revealed that there were 50 units on hand.
instructions
answer the following independent questions and show computations supporting your
answers.
1>assume that the company uses the fifo method. the value of the ending inventory at
december 31 is $__________.
2>assume that the company uses the average cost method. the value of the ending
inventory on december 31 is $__________.
3>assume that the company uses the lifo method. the value of the ending inventory on
december 31 is $__________.
4>assume that the company uses the fifo method. the value of the cost of goods sold at
december 31 is $__________.
