1) the public company accounting oversight board oversees the work of auditors of
public companies.
2) held-to-maturity investments are categorized as long-term assets on the balance
sheet, irrespective of the maturity date.
3) the asset turnover ratio is calculated by dividing cost of goods sold by average total
assets.
4) the beginning balance in the common stock account of alpha technologies inc. was
$80,000. the revenues and expenses amounted to $60,000 and $40,000, respectively.
during the year, the company did not declare any dividends or issue common stock. the
common stock account will have $100,000 at the end of the year.
5) the financing activities section of the statement of cash flows includes paying
dividends and paying off loans.
6) the interest period extends from the original date of the note to the maturity date.
7) which of the following statements helps analyze the business performance in terms
of profitability?
8) net sales revenue is equal to sales revenue less cost of goods sold.
9) an amortization schedule details each loan payment’s allocation between principal
and interest and also the beginning and ending balances of the loan.
10) which of the following types of stock is considered least risky for investors?
a) common stock
b) par value stock
c) no-par stock
d) preferred stock
11) a check for which a maker’s bank account has inadequate money to pay the check is
known as ________.
a) nonsufficient funds checks
b) outstanding checks
c) restrictive checks
d) canceled checks
12) marsh supply services received $1,000 cash from a customer which was owed to the
business from the previous month. what is the effect of the cash receipt on the
accounting equation?
a) accounts receivable decreases and stockholders’ equity decreases
b) cash account increases and accounts receivable decreases
c) accounts payable increases and stockholders’ equity decreases
d) cash account increases and accounts payable decreases
13) in a multi-step income statement, which of the following items is excluded from the
calculation of operating income?
a) sales revenue
b) interest expense
c) selling expense
d) administrative expense
14) avery inc. uses the periodic inventory system. on february 1, the corporation
purchased inventory on account for $10,000. the terms were 3/10, n/30. on february 2, it
returned damaged goods worth $400 to the supplier and was granted an allowance. give
the journal entry for the payment if the invoice is paid after the discount period.
a)
b)
c)
d)
15) which of the following adjusted balances would appear in the balance sheet credit
column of a worksheet?
a) rent revenue
b) insurance expense
c) salaries payable
d) equipment
16) an income statement includes ________.
a) land and salaries payable
b) common stock, retained earnings, and dividends
c) furniture and cash
d) service revenue and utilities expense
17) on january 1, 2015, carter sales issued $15,000 in bonds for $15,800. they were
8-year bonds with a stated rate of 9%, and pay semiannual interest. carter sales uses the
straight-line method to amortize the bond premium. after the first interest payment on
june 30, 2015, what was the bond carrying amount?
a) $15,800
b) $15,750
c) $15,050
d) $15,000
18) which of the following is the correct journal entry for purchase returns of goods
purchased on account under the periodic inventory system?
a)
b)
c)
d)
19) a company sold merchandise for $20,000 on account with terms of 3/10, n/30. the
company uses a perpetual inventory system. after two days, it received defective
merchandise worth $2,000. the journal entry to record the cash receipt for sale if the
payment is received within 10 days of the invoice date would include ________.
a) a debit to cash for $17,460, a credit to merchandise inventory for $540, and a credit
to sales revenue for $18,000
b) a debit to cash for $17,460, a debit to sales discount for $540, and a credit to
accounts receivable for $18,000
c) a debit to cash for $18,000, a debit to merchandise inventory for $2,000 and a credit
to accounts receivable
d) a debit to sales for $20,000, a credit to accounts receivable for $20,000, and a credit
to sales discount for $2,000
20) on january 1, 2015, carter sales issued $15,000 in bonds for $14,700. they were
6-year bonds with a stated rate of 9%, and pay semiannual interest. carter sales uses the
straight-line method to amortize the bond discount. on june 30, 2015, when carter
makes the first payment to bondholders, how much will they report as interest expense?
a) $675
b) $700
c) $25
d) $825
21) which of the following is the key significance of the acid-test ratio?
a) it measures a company’s ability to pay its current liabilities if they are due
immediately
b) it measures the ability of the company to earn profits out of the sales made by it
c) it reflects how much long-term debt a company has
d) it indicates how much cash could be realized by selling the inventory
22) gray financial services inc. invested $15,000 to acquire 3,750 shares of mitt
investments inc. on march 15, 2012. this investment represents less than 20% of the
investee’s voting stock. on may 7, 2016, greg financial services inc. sells 1,750 shares
for $12,250. when the transaction is recorded in a journal entry, ________.
a) gain on disposal will be credited
b) long-term investmentsavailable-for-sale will be debited
c) cash will be credited
d) long-term investmentsheld-to-maturity will be debited
23) which of the following is true of goodwill?
a) goodwill must be capitalized when acquired, and amortized over 7 years or less
b) both created and acquired goodwill must be recorded in the books
c) goodwill must be expensed when acquired
d) goodwill is not amortized
24) the accountant for jones auto repair inc. failed to make an adjusting entry to record
$5,000 of unpaid salaries for the last 2 weeks of the year. which of the following is an
impact of this omission?
a) the net income will be overstated
b) the total assets will be understated
c) the net income will be understated
d) the total assets will be overstated
25) what is the term used for the difference between the equipment account and the
accumulated depreciation account?
a) contra asset
b) market value
c) historical cost
d) book value
26) a parent company is a company that ________.
a) is controlled by another corporation
b) owns a controlling interest in another company
c) is the first to begin operations in an industry
d) has a trading investment in another company
27) which of the following account’s balance is carried forward to the next accounting
period?
a) accumulated depreciation
b) depreciation expense
c) dividends
d) sales revenue
28) the following is the adjusted trial balance as of december 31, 2015 of martin watch
inc.:
provide the closing entry for service revenue.
29) on december 31, 2014, ferrero inc. borrowed $500,000 by signing a note payable.
the note is for 5 years and bears interest at the rate of 8%. the note is payable in 5 yearly
installments of $100,000 plus interest due at the end of every year beginning on
december 31, 2015. which portion is classified as the long-term portion of notes
payable at december 31, 2014?
30) melody instruments inc. sells musical instruments. on december 31, 2015, after its
first month of business, melody instruments inc. had the following balances in its
accounts, listed alphabetically.
determine the balance in the cash account and prepare the trial balance.
31) clark sales sold 450 units of product to a customer on account. the company uses
the perpetual inventory system. the selling price was $28 per unit, and the cost,
according to the company’s inventory records, was $12 per unit. provide the journal
entry to record the sales revenue.
32) prepare the vertical analysis report of the balance sheet data given below. (round off
the percentages to two decimal places.)
balance sheet
december 31, 2015
2015
assets
current assets:
cash and cash equivalents$10,000
accounts receivable, net15,600
merchandise inventory38,000
total current assets$63,600
long-term investments$15,000
property, plant, and equipment, net195,000
total assets$273,600
liabilities
current liabilities:
accounts payable$8,500
notes payable1,400
total current liabilities$9,900
long-term liabilities$54,000
total liabilities$63,900
stockholders’ equity
common stock$161,000
retained earnings48,700
total stockholders’ equity209,700
total liabilities and stockholders’ equity$273,600
33) on july 1, alpha inc. paid rent of $15,000 for a small equipment storage area for the
period of july 1 till december 31. provide the adjusting journal entry on july 31. (ignore
explanation) assume the prepaid expense is initially recorded as an asset.
