1) there is only one way to calculate interest correctly.
2) the periodic inventory system provides an up to date amount of inventory on hand.
3) under a periodic inventory system, the merchandise on hand at the end of the period
is determined by a physical count of the inventory.
4) when one individual is responsible for all related activities, the potential for errors
and irregularities is decreased.
5) the present value of a long-term note is based on the payment amounts, the length of
time until the amounts are paid, and the discount rate.
6) inventory turnover is a measure of liquidity that focuses on efficient use of inventory.
7) electronic funds transfer (eft) is a disbursement system that uses a telephone or a
computer to transfer cash from one location to another.
8) the payment of interest on bonds payable is classified as a cash outflow from
operating activities.
9) under the accounts receivable aging method, the balance in allowance for doubtful
accounts must be considered carefully prior to adjusting for estimated uncollectible
accounts.
10) when a change in estimate is made, there is no correction of previously recorded
depreciation expense.
11) earnings per share is calculated by dividing net income minus preferred stock
dividends for the period by the average number of common shares outstanding during
the period.
12) the economic entity assumption is that an enterprise will remain in operations for
the foreseeable future.
13) in periods of falling prices, fifo will result in a larger net income than the lifo
method.
14) the accumulated depreciation account represents a cash fund available to replace
plant assets.
15) young company lends dobson industries $30,000 on january 1, 2012, accepting a
9-month, 12% interest note. if dobson dishonors the note and does not pay it in full at
maturity but young expects that it will eventually be able to collect the debt, which of
the following entries should most likely be made by young company?
16) goll clothing store had a balance in the accounts receivable account of $820,000 at
the beginning of the year and a balance of $880,000 at the end of the year. net credit
sales during the year amounted to $7,310,000. the receivables turnover ratio was
a.8.6 times
b.8.3 times
c.8.2 times
d.8.9 times
17) elston company compiled the following financial information as of december 31,
2012:
elstons retained earnings on december 31, 2012 are:
a.$225,000
b.$270,000
c.$240,000
d.$ 15,000
18) starting with net income and adjusting it for items that affected reported net income
but which did not affect cash is called the
a.direct method
b.indirect method
c.working capital method
d.cost-benefit method
19) a liquidity ratio measures the
a.income or operating success of a company over a period of time
b.ability of a company to survive over a long period of time
c.short-term ability of a company to pay its maturing obligations and to meet
unexpected needs for cash
d.percentage of total financing provided by creditors
20) vertical analysis is a technique that expresses each item in a financial statement
a.in dollars and cents
b.as a percent of the item in the previous year
c.as a percent of a base amount
d.starting with the highest value down to the lowest value
21) hagen company had these transactions pertaining to stock investments
feb. 1purchased 2,500 shares of farley company (10%) for $41,500 cash plus brokerage
fees of $1,000.
june 1received cash dividends of $2 per share on farley stock.
oct. 1sold 1,000 shares of farley stock for $20,000 less brokerage fees of $500.
dec. 1received cash dividends of $2 per share on farley stock.
the entry to record the sale of the stock would include a
a.debit to cash for $20,000
b.credit to gain on sale of stock investments for $1,000
c.debit to stock investment for $17,000
d.credit to gain on sale of stock investments of $2,500
22) the balance of allowance for doubtful accounts prior to making the adjusting entry
to record bad debts expense
a.is relevant when using the percentage of receivables basis
b.is relevant when using the direct write-off method
c.is relevant to both the percentage of receivables basis and the direct write-off method
d.will never show a debit balance at this stage in the accounting cycle
23) in a recent year hart corporation had net income of $140,000, interest expense of
$30,000, and tax expense of $40,000. what was hart corporations times interest earned
ratio for the year?
a.7.00
b.4.66
c.5.67
d.6.00
24) bathlinks corporation has a debt to total assets ratio of 73%. this tells the user of
bathlinkss financial statements
a.bathlinks is getting a 27% return on its assets
b.there is a risk that bathlinks cannot pay its debts as they come due
c.73% of the assets are financed by the stockholders
d.based on this measure, the user should not invest in bathlinks
25) a bond with a face value of $200,000 and a quoted price of 98 has a selling price of
a.$196,500
b.$196,100
c.$196,010
d.$197,000
26) a journal provides
a.the balances for each account.
b.information about a transaction in several different places.
c.a list of all accounts used in the business.
d.a chronological record of transactions.
27) the receivables turnover ratio
a.is computed by dividing net credit sales for the accounting period by the cash
realizable value of accounts receivable on the last day of the accounting period
b.can be used to compute the average collection period
c.is a method of evaluating the solvency of net accounts receivable
d.is only important to internal users of accounting information
28) all of the following factors would be signs of an investor’s significant influence over
an investee except
a.the investor has representation on the investee’s board of directors
b.the investor participates in the investee’s policy-making process
c.there are immaterial transactions between the investor and the investee
d.the common stock held by other stockholders is dispersed
29) internal control is defined, in part, as a plan that safeguards
a.all balance sheet accounts
b.assets
c.liabilities
d.capital stock
30) bishop company wrote checks totaling $17,080 during october and $18,650 during
november. $16,240 of these checks cleared the bank in october, and $18,220 cleared the
bank in november. what was the amount of outstanding checks on november 30?
a.$1,270
b.$230
c.$610
d.$1,980
31) a legal document that indicates the name of the issuer, the face value of the bond
and such other data is called
a.a bond certificate
b.a bond debenture
c.trading on the equity
d.a convertible bond
32) west county bank agrees to lend drake builders company $100,000 on january 1.
drake builders company signs a $100,000, 6%, 6-month note. what entry will drake
builders company make to pay off the note and interest at maturity assuming that
interest has been accrued to june 30?
33) in computing cash payments for income taxes, a decrease in income taxes payable
is ______________ to (from) income tax expense.
34) hensley, inc. reports the following liabilities (in thousands) on its january 31, 2012,
balance sheet and notes to the financial statements.
instructions
prepare the liabilities section of hensley’s balance sheet as at january 31,2012.
35) using these data from the comparative balance sheet of kile company, perform
vertical analysis.
36) important objectives of a system of internal controls are to safeguard assets and to
enhance the accuracy and reliability of the accounting records. briefly discuss how (1)
cost-benefit considerations, (2) the human element, and (3) the size of the business
affect the implementation of a system of internal controls.
37) the adjusted trial balance of warbocks corporation at december 31, 2011 includes
the following accounts: retained earnings $12,600; dividends $5,000; service revenue
$30,000; salaries expense $15,000; insurance expense $2,000; rent expense $3,500;
supplies expense $500; and depreciation expense $1,000. prepare a retained earnings
statement for the year.
38) the income statement for a merchandising company presents five amounts not
shown on a service companys income statement. identify and briefly explain the five
unique amounts.
39) identify which of the following accounts appear on a balance sheet.
1. service revenue
2. cash
3. common stock
4. accounts payable
5. rent expense
6. supplies
7. land
40) what is the lifo reserve? what are the consequences of ignoring a large lifo reserve
when analyzing a company?
41) obligations in written form are called ______________ and usually require the
borrower to pay interest.