1) an event or transaction should be classified as an extraordinary item if it is unusual in
nature or if it occurs infrequently.
2) bad debt losses are a cost of selling on credit.
3) a stock dividend does not affect the total amount of stockholders equity.
4) an account is often referred to as a t-account because of the way it is constructed.
5) unrealized gains and losses on available-for-sale securities are reported on the
income statement.
6) the basic accounting equation states that assets = liabilities.
7) segregation of duties among employees eliminates the possibility of collusion.
8) an aging of accounts receivable schedule is based on the premise that the longer the
period an account remains unpaid, the greater the probability that it will eventually be
collected.
9) the comparative balance sheets for gallup company appear below:
additional information:
1>net income for the year ending december 31, 2012, was $20,000.
2>cash dividends of $12,000 were declared and paid during the year.
3>long-term investments that had a book value of $18,000 were sold for $13,000.
4>sales for 2012 are $120,000.
instructions
1>prepare a statement of cash flows for the year ended december 31, 2012, using the
indirect method.
2>compute the following cash based ratios:
a.current cash debt coverage ratio
b.cash debt coverage ratio
10) which of the following is not an acceptable way of displaying the components of
other comprehensive
income?
a. combined statement of retained earnings
b. second income statement
c. combined statement of comprehensive income
d. all of the above are acceptable
11) which of the following is an advantage of corporations relative to partnerships and
sole proprietorships?
a.reduced legal liability for investors
b.harder to transfer ownership
c.lower taxes
d.most common form of organization
12) a revenue generally
a.increases assets and liabilities.
b.increases assets and stockholders equity.
c.increases assets and decreases stockholders equity.
d.leaves total assets unchanged.
13) par value
a.represents what a share of stock is worth
b.represents the original selling price for a share of stock
c.is established for a share of stock after it is issued
d.is the value assigned per share in the corporate charter
14) which of the following describes the classification and normal balance of the
unearned rent revenue account?
a.asset, debit
b.liability, credit
c.revenues, credit
d.expense, debit
15) if a company has overdrawn its bank balance, then
a.its cash account will show a debit balance.
b.its cash account will show a credit balance.
c.the cash account debits will exceed the cash account credits.
d.it cannot be detected by observing the balance of the cash account.
16) in the balance sheet, the account discounts on bonds payable is
a.added to bonds payable
b.deducted from bonds payable
c.classified as a stockholders’ equity account
d.classified as a revenue account
17) ace company is a retail store. due to competition, it is having trouble selling its
products. thus, inventory has been building up. aces current ratio has not changed for
the past three years, in spite of the inventory build up. which of the following
statements is true?
a.as long as the current ratio remains constant, there is no need for concern
b.the composition of current assets and current liabilities does not matter
c.the management of ace should consider the affect of slow moving inventory on its
liquidity
d.since inventory is a current asset, any increases should automatically cause the current
ratio to rise
18) the accounting equation may be expressed as:
a.assets = stockholders equity liabilities
b.assets = liabilities + stockholders equity
c.assets + liabilities = stockholders equity
d.assets + stockholders equity = liabilities
19) notes or accounts receivables that result from sales transactions are often called
a.sales receivables
b.non-trade receivables
c.trade receivables
d.merchandise receivables
20) a company spends $20 million dollars for an office building. over what period
should the cost be written off?
a.when the $20 million is expended in cash
b.all in the first year
c.after $20 million in revenue is earned
d.none of the above
21) miles co. had these transactions during the current period.
prepare the journal entries for the preceding transactions.
22) nichols company uses the percentage of receivables method for recording bad debts
expense. the accounts receivable balance is $200,000 and credit sales are $1,000,000.
management estimates that 5% of accounts receivable will be uncollectible. what
adjusting entry will nichols company make if the allowance for doubtful accounts has a
credit balance of $2,000 before adjustment?
23) nance co. holds gant inc.s $20,000, 120 day, 9% note. the entry made by nance co.
when the note is collected, assuming no interest has previously been accrued is:
24) the expense recognition principle is frequently referred to as the matching principle.
25) some of the following errors would cause the debit and credit columns of the trial
balance to have unequal totals. for each of the four cases, state whether the error would
cause unequal totals in the trial balance. if the error causes unequal totals, indicate the
amount of difference between the columns and state whether the debit or credit is larger.
each case is to be considered independently of the others.
1)a collection on account of $400 was journalized and posted as a debit to cash $400
and a credit to service revenue $400.
2)a $950 purchase of supplies on account was recorded as a debit of $950 to equipment
and a credit of $950 to accounts payable.
3)a purchase of equipment for $3,500 on account was not recorded.
4)a $270 receipt on account was recorded as a $720 debit to cash and a $270 credit to
accounts receivable.
26) the statement of cash flows for nyland corporation reveals the following
information:
provide three comments about this information. make your comments concise yet
thorough.
27) patrick corporation is authorized to issue 1,000,000 shares of $1 par value common
stock. during 2012, the company has the following stock transactions.
jan.15issued 600,000 shares of stock at $7 per share.
sept.5purchased 20,000 shares of common stock for the treasury at $8 per share.
dec.6declared a $0.50 per share dividend to stockholders of record on december 20,
payable january 3, 2013.
instructions
journalize the transactions for patrick corporation.
28) without an adjusting entry for accrued interest expense, liabilities and interest
expense are
understated, and net income and stockholders equity are overstated.
29) a __________________ fund is used to pay relatively small expenditures.
30) the _________________ is prepared by an independent auditor stating the auditors
opinion as to the fairness of the presentation of the financial statements.