1) the going concern assumption is that the business will continue in operation long
enough to carry out its existing objectives and commitments.
2) the extent of internal control features adopted by a company must be evaluated in
terms of cost-benefit.
3) an unrealized gain or loss on trading securities is reported as a separate component of
stockholders’ equity.
4) long-term investments appear in the property, plant, and equipment section of the
balance sheet.
5) for accounting purposes, stated value is treated the same way as par value.
6) the accounting equation can be expressed as assets – liabilities = stockholders equity.
7) the average collection period is frequently used to assess the effectiveness of a
companys credit and collection policies.
8) neither corporate bond interest nor dividends are deductible for tax purposes.
9) if a corporation pays taxes on its income, then stockholders will not have to pay taxes
on the dividends received from that corporation.
10) one way of stating the accounting equation is: assets + liabilities = stockholders
equity.
11) the cash balance per books for wellmeyer company on november 30, 2012, is
$10,740.93. the following checks and receipts were recorded for the month of december
2012:
check no. 18 was correctly written for $708.62 for a payment on account. the nsf check
was from s. gill, a customer, in settlement of an account receivable. an entry has not
been made for the nsf check. the credit memo is for the collection of a note receivable
including interest of $60 that has not been accrued. the bank service charge is $15.00.
instructions
(a)prepare a bank reconciliation at december 31.
(b)prepare the adjusting journal entries required by the bank reconciliation.
12) the modified accelerated cost recovery system (macrs) is a depreciation method that
a.is used for tax purposes
b.must be used for financial statement purposes
c.is required by the sec
d.expenses an asset over a single year because capital acquisitions must be expensed in
the year purchased
13) the group of users of accounting information charged with achieving the goals of
the business is its
a.auditors
b.investors
c.managers
d.creditors
14) which statement is incorrect?
a.dividends represent a distribution by a corporation to its stockholders.
b.dividends are shown on the income statement.
c.dividends reduce stockholders equity, thus the dividends account increases on the left
side.
d.the dividends account has a normal debit balance.
15) the usual ordering of accounts in the general ledger is
a.assets, liabilities, stockholders equity, revenues, and expenses.
b.assets, liabilities, stockholders equity, expenses, and revenues.
c.liabilities, assets, stockholders equity, revenues, and expenses.
d.stockholders equity, assets, liabilities, expenses, and revenues.
16) shafer company has the following accounts in its general ledger at july 31: accounts
receivable $49,000 and allowance for doubtful accounts $3,400. during august, the
following transactions occurred.
(a)journalize the transactions.
(b)indicate the statement presentation of service charges.
17) the operating cycle of a company is the average time that is required to go from
cash to
a.sales in producing revenues
b.cash in producing revenues
c.inventory in producing revenues
d.accounts receivable in producing revenues
18) which of the following activities would be classified as an investing activity?
a.cash received from interest revenue
b.cash paid (loaned) to a borrower as a loan
c.cash received from dividend revenue
d.cash paid to reacquire capital stock
19) the sales revenues section of an income statement for a retailer would not include
a.sales discounts
b.sales
c.net sales
d.cost of goods sold
20) the journal entry to record the issuance of bonds at a discount will include a
a.debit to cash for the face amount of the bonds
b.debit to cash for the face amount of the bonds plus the amount of the discount
c.debit to cash for the face amount of the bonds minus the amount of the discount
d.credit to cash for the face amount of the bonds
21) significant noncash transactions would not include
a.conversion of bonds into common stock
b.asset acquisition through bond issuance
c.treasury stock acquisition
d.exchange of plant assets
22) the purchase of an asset for cash
a.increases assets and stockholders equity.
b.increases assets and liabilities.
c.decreases assets and increases liabilities.
d.leaves total assets unchanged.
23) on april 5 donnas boutique accepted a visa card for a $500 purchase. visa charges a
2% service fee. the entry to record this transaction would include a
a.credit to cash of $490
b.debit to cash of $500
c.debit to service charge expense of $10
d.credit to service charge expense of $10
24) the accounts of a business before an adjusting entry is made to record accrued
revenue reflect an:
a.understated liability and an overstated revenue
b.overstated asset and an understated revenue
c.understated expense and an overstated revenue
d.understated asset and an understated revenue
25) bonds that are issued against the general credit of the borrower are called
a.callable bonds
b.debenture bonds
c.secured bonds
d.term bonds
26) the dividends account is closed to the income summary account at the end of each
year.
27) prepare adjusting entries for the following transactions. omit explanations.
1>depreciation on equipment is $1,340 for the accounting period.
2>interest owed on a loan but not paid or recorded is $275.
3>there was no beginning balance of supplies and $550 of office supplies were
purchased during the period. at the end of the period $150 of supplies were on hand.
4>prepaid rent had a $1,000 normal balance prior to adjustment. by year end $700 had
expired.
5>accrued salaries at the end of the period amounted to $900.
28) your roommate is uncertain about the advantages of a promissory note. compare the
advantages of a note receivable with those of an account receivable.
29) a sales slip, a check, and a cash register tape are examples of ________________
used as evidence that a transaction has taken place.
30) hannigan company issued 11%, 5-year, $600,000 face value bonds that pay interest
semi-annually on october 1 and april the bonds are dated april 1, 2012, and are issued
on that date. the discount rate of interest for such bonds on april 1, 2012, is 10%. what
cash proceeds did hannigan company receive from issuance of the bonds?
31)
river ridge music school borrowed $30,000 from the bank signing a 10%, 6-month note on
november principal and interest are payable to the bank on may if the company prepares
monthly financial statements, what adjusting entry should the company make at november
30 with regard to the note (round answer to the nearest dollar)?
32) on january 1, 2012, the black corporation had $2,000,000 of $10 par value common
stock outstanding that was issued at par and retained earnings of $1,000,000. the
company issued 120,000 shares of common stock at $15 per share on july 1. on
december 15, the board of directors declared a 10% stock dividend to stockholders of
record on december 31, 2012, payable on january 15, 2013. the market value of black
corporation stock was $17 per share on december 15 and $16 per share on december 31.
net income for 2012 was $500,000.
instructions
(1)journalize the issuance of stock on july 1 and the declaration of the stock dividend on
december 15.
(2)prepare the stockholders equity section of the balance sheet for black corporation at
december 31, 2012.