1) as interest is recorded on an interest-bearing note, the interest expense account is
a.increased; the notes payable account is increased
b.increased; the notes payable account is decreased
c.increased; the interest payable account is increased
d.decreased; the interest payable account is increased
2) indicate which one of the following would appear on the income statement of both a
merchandising company and a service company.
a.gross profit
b.operating expenses
c.sales revenues
d.cost of goods sold
3) how can a company improve its current ratio?
a.work with a creditor to reclassify some current debt into long-term debt
b.use cash to reduce current liabilities
c.nothing can ethically be done to improve the current ratio
d.use excess cash to buy new equipment
4) if accounts payable have increased during a period
a.revenues on an accrual basis are less than revenues on a cash basis
b.expenses on an accrual basis are less than expenses on a cash basis
c.expenses on an accrual basis are greater than expenses on a cash basis
d.expenses on an accrual basis are the same as expenses on a cash basis
5) typically the chart of accounts begins with
a.asset accounts.
b.liability accounts.
c.revenue accounts.
d.expense accounts.
6) barnett company had the following records:
what is barnetts average days in inventory for 2011? (rounded)
a.41.5 days
b.41. 0 days
c.40.6 days
d.83.0 days
7) adjusting entries affect at least:
a.one revenue and one expense account
b.one asset and one liability account
c.one revenue and one balance sheet account
d.one income statement account and one balance sheet account
8) the direct write-off method of accounting for bad debts
a.uses an allowance account
b.uses a contra asset account
c.does not require estimates of bad debt losses
d.is the preferred method under generally accepted accounting principles
9) it is not true that current assets are resources that are expected to be
a.realized in cash within one year
b.sold within one year
c.consumed within one year
d.acquired within one year
10) *on january 1, sewell corporation issues $1,000,000, 5-year, 12% bonds at 96 with
interest payable on january 1. what is the carrying value of the bonds at the end of the
third interest period?
a.$984,000
b.$976,000
c.$944,000
d.$928,000
11) when the allowance method is used to account for uncollectible accounts, bad debts
expense is debited when
a.a sale is made
b.an account becomes bad and is written off
c.management estimates the amount of uncollectibles
d.a customer’s account becomes past due
12) the basic form of a journal entry has the
a.debit account entered first and indented.
b.credit account entered first and indented.
c.debit account entered first at the extreme left margin.
d.credit account entered first at the extreme left margin.
13) use the following data to determine the total dollar amount of assets to be classified
as current assets.
a.$580,000
b.$430,000
c.$360,000
d.$290,000
14) 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 purchase of the farley stock would include a
a.debit to the stock investments account for $41,500
b.credit to cash for $41,500
c.debit to the stock investments account for $42,500
d.debit to investment expense for $1,000
15) for each entry below make a correcting entry if necessary. if the entry given is
correct, then state “no entry required.”
(a)the $50 cost of repairing a printer was charged to computer equipment.
(b)the $5,500 cost of a major engine overhaul was debited to repair expense. the
overhaul is expected to increase the operating efficiency of the truck.
(c)the $6,000 closing costs associated with the acquisition of land were debited to
operating expenses.
(d)a $400 charge for transportation expenses on new equipment purchased was debited
to freight-in.
16) which measure(s) is(are) an evaluation of a companys ability to pay current
liabilities?
a.1 only
b.2 only
c.both 1 and 2
d.neither 1 nor 2