1) Which of the following relates to both relevance and faithful representation?
a.Cost constraint
b.Predictive value
c.Verifiability
d.Neutrality
2) A trial balance
a.proves that debits and credits are equal in the ledger
b.supplies a listing of open accounts and their balances that are used in preparing
financial statements
c.is normally prepared three times in the accounting cycle
d.All of these answer choices are correct
3) On April 15 of the current year, a fire destroyed the entire uninsured inventory of a
retail store. The following data are available:
Sales, January 1 through April 15$480,000
Inventory, January 180,000
Purchases, January 1 through April 15400,000
Markup on cost25%
The amount of the inventory loss is estimated to be
a.$96,000
b.$48,000
c.$120,000
d.$80,000
4) On January 1, Patterson Inc. issued $4,000,000, 9% bonds for $3,756,000. The
market rate of interest for these bonds is 10%. Interest is payable annually on December
31 . Patterson uses the effective-interest method of amortizing bond discount. At the
end of the first year, Patterson should report unamortized bond discount of
a.$219,600
b.$228,400
c.$206,440
d.$204,000
5) Jane wants to set aside funds to take an around the world cruise in four years. Jane
expects that she will need $12,000 for her dream vacation. If she is able to earn 8% per
annum on an investment, how much will she need to set aside at the beginning of each
year to accumulate sufficient funds?
a.$2,663
b.$16,325
c.$8,820
d.$2,466
6) The following information was available from the inventory records of Rich
Company for January:
Units Unit CostTotal Cost
Balance at January 13,000$9.77$29,310
Purchases:
January 62,00010.3020,600
January 262,70010.7128,917
Sales:
January 7(2,500)
January 31(3,700)
Balance at January 31 1,500
Assuming that Rich maintains perpetual inventory records, what should be the
inventory at January 31, using the moving-average inventory method, rounded to the
nearest dollar?
a.$15,757
b.$15,356
c.$15,390
d.$15,540
7) The failure to properly record an adjusting entry to accrue an expense will result in
an
a.understatement of expenses and an understatement of liabilities
b.understatement of expenses and an overstatement of liabilities
c.understatement of expenses and an overstatement of assets
d.overstatement of expenses and an understatement of assets
8) In preparing Titan Inc.s statement of cash flows for the year ended December 31,
2015, the following amounts were available:
Collect note receivable$410,000
Issue bonds payable 426,000
Purchase treasury stock 200,000
What amount should be reported on Titan, Incs statement of cash flows for financing
activities?
a.$ 16,000
b.$836,000
c.$226,000
d.$210,000
9) When the conventional retail inventory method is used, markdowns are commonly
ignored in the computation of the cost to retail ratio because
a.there may be no markdowns in a given year
b.this tends to give a better approximation of the lower of cost or market
c.markups are also ignored
d.this tends to result in the showing of a normal profit margin in a period when no
markdown goods have been sold
10) Hay Company had January 1 inventory of $180,000 when it adopted dollar-value
LIFO. During the year, purchases were $1,080,000 and sales were $1,800,000.
December 31 inventory at year-end prices was $227,700, and the price index was 110 .
What is Hay Companys gross profit?
a.$747,000
b.$749,700
c.$767,700
d.$1,590,300
11) Which of the following events will appear in the cash flows from financing
activities section of the statement of cash flows?
a.Cash purchases of equipment
b.Cash purchases of bonds issued by another company
c.Cash received as repayment for funds loaned
d.Cash purchase of treasury stock
12) The payout ratio is calculated by dividing
a.dividends per share by earnings per share
b.cash dividends by net income plus preferred dividends
c.cash dividends by market price per share
d.cash dividends by net income less preferred dividends
13) Which of the following statements is True about the accrual basis of accounting?
a.The timing of cash receipts and disbursements is emphasized
b.A minimal amount of record keeping is required in accrual basis accounting compared
to cash basis
c.This method is used less frequently by businesses than the cash method of accounting
d.Revenues are recognized in the period the performance obligation is satisfied,
regardless of the time period the cash is received
14) *Adjusting entries that should be reversed include
a.all accrued revenues
b.all accrued expenses
c.those that debit an asset or credit a liability
d.All of these answer choices are correct
15) According to the FASB’s conceptual framework, comprehensive income includes
which of the following?
Operating IncomeInvestments by Owners
a.YesNo
b.YesYes
c.NoYes
d.NoNo
16) Sun Inc. factors $3,000,000 of its accounts receivables with recourse for a finance
charge of 3%. The finance company retains an amount equal to 10% of the accounts
receivable for possible adjustments. Sun estimates the fair value of the recourse liability
at $150,000. What would be recorded as a gain (loss) on the transfer of receivables?
a.Gain of $90,000
b.Loss of 240,000
c.Gain of $540,000
d.Loss of $150,000
17) All of the following represent costs of providing financial information except
a.preparing
b.disseminating
c.accessing capital
d.auditing
18) Cash equivalents are
a.treasury bills, commercial paper, and money market funds purchased with excess cash
b.investments with original maturities of three months or less
c.readily convertible into known amounts of cash
d.All of these answers are correct