1) the difference between the cost of a depreciable asset and its related accumulated
depreciation is referred to as the:
a.market value of the asset
b.blue book value of the asset
c.book value of the asset
d.depreciated difference of the asset
2) nance company owns 10% interest in the stock of potter corporation. during the year,
potter pays $30,000 in dividends to nance, and reports $200,000 in net income. nance
companys investment in potter will increase nance net income by
a.$20,000
b.$10,000
c.$30,000
d.$50,000
3) for each of the following items, indicate by using the appropriate code letter, how the
item should be reported in the statement of cash flows, using the indirect method.
a.added to net income
b.deducted from net income
c.cash outflowinvesting activity
d.cash inflowinvesting activity
e.cash outflowfinancing activity
f.cash inflowfinancing activity
g.significant noncash investing and financing activity
1>decrease in accounts payable during a period
2>declaration and payment of a cash dividend.
3>loss on sale of land.
4>decrease in accounts receivable during a period.
5>redemption of bonds for cash.
6>proceeds from sale of equipment at book value.
7>issuance of common stock for cash.
8>purchase of a building for cash.
9>acquisition of land in exchange for common stock.
10>increase in merchandise inventory during a period.
4) which of the following is not a method of accounting for stock investments?
a.cost method
b.stock method
c.consolidated financial statements
d.equity method
5) which of the following would not be an adjustment to net income using the indirect
method?
a.depreciation expense
b.an increase in prepaid insurance
c.amortization expense
d.an increase in land
6) which of the following is a true statement about closing the books of a corporation?
a.expenses are closed to the expense summary account
b.only revenues are closed to the income summary account
c.revenues and expenses are closed to the income summary account
d.revenues, expenses, and the dividends account are closed to the income summary
account
7) a comparison with other companies that provides insight into a company’s
competitive position is most commonly known as which of the following types of
comparisons?
a.industry average comparison
b.intracompany comparison
c.intercompany comparison
d.comprehensive income comparison
8) mitchell corporation bought equipment on january 1, 2012 .the equipment cost
$120,000 and had an expected salvage value of $20,000. the life of the equipment was
estimated to be 6 years. the depreciation expense using the straight-line method of
depreciation is
a.$23,333
b.$24,000
c.$16,667
d.none of the above
9) the company whose stock is owned by the parent company is called the
a.controlled company
b.subsidiary company
c.investee company
d.sibling company
10) which of the following is not one of the main factors that contribute to fraudulent
activity?
a.opportunity
b.incompatible duties
c.financial pressure
d.rationalization
11) marvin services corporation had the following accounts and balances:
if total stockholder’s equity was $38,000, what would be the balance of the buildings
account?
a.$14,000
b.$54,000
c.$58,000
d.$18,000