ACCT 814 Midterm 1 | Course Paper

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1) generally, convertible bonds do not pay interest.

2) the sale of land for cash would be classified as a cash inflow from an investing

activity.

3) the inventory turnover ratio measures the number of times on the average the

inventory was sold during the period.

4) using the indirect method, an increase in accounts payable during a period is

deducted from net income in calculating cash provided by operations.

5) the carrying value of a bond is equal to the market price on the date of sale.

6) a credit means that an account has been increased.

7) on january 1, ripken corporation had 60,000 shares of $10 par value common stock

outstanding. on march 17 the company declared a 10% stock dividend to stockholders

of record on march 20. market value of the stock was $13 on march 17. the entry to

record the transaction of march 17 would include a

a.debit to stock dividends for $78,000

b.credit to cash for $78,000

c.credit to common stock dividends distributable for $78,000

d.credit to common stock dividends distributable for $18,000

8) the sale of receivables by a business

a.indicates that the business is in financial difficulty

b.is generally the major revenue item on its income statement

c.is an indication that the business is owned by a captive finance company

d.can be a quick way to generate cash for operating needs

9) a note receivable is executed in december. when the note is paid the following

february, the payees entry includes (assuming a calendar-year accounting period and no

reversing entries) a

a.credit to interest receivable

b.credit to cash

c.debit to notes receivable

d.debit to interest income

10) which of the following are internal reports that accounting provides to internal

users?

a.forecasts of cash needs for next year

b.financial comparisons of operating activity alternative

c.both a and b are internal reports

d.neither a or b is an internal report

11) ending retained earnings for a period is equal to:

a.beginning retained earnings + net income + dividends

b.beginning retained earnings net income dividends

c.beginning retained earnings + net income dividends

d.beginning retained earnings net income + dividends

12) equipment costing $40,000 with a salvage value of $8,000 and an estimated life of 8

years has been depreciated using the straight-line method for 2 years. assuming a

revised estimated total life of 6 years and no change in the salvage value, the

depreciation expense for year 3 would be

a.$6,000

b.$5,333

c.$8,000

d.$4,000

13) why should the income statement be prepared first?

a.the statement of cash flows should be prepared first because it determines the sources

of cash. that information is then used in preparing the income statement

b.net income from the income statement flows into the retained earnings statement. the

ending retained earnings balance then flows into the balance sheet

c.the income statement does not have to be prepared first. financial statements can be

prepared in any order

d.none of these statements is correct

14) using the following balance sheet and income statement data, what is the total

amount of working capital?

average common shares outstanding was 10,000

a.$ 2,000

b.$14,000

c.$ 4,000

d.$ 6,000

15) current liabilities are due

a.but not receivable for more than one year

b.but not payable for more than one year

c.and receivable within one year

d.and payable within one year

16) in the stockholders equity section of the balance sheet

a.common stock dividends distributable will be classified as part of additional paid-in

capital

b.common stock dividends distributable will appear in its own subsection of the

stockholders equity

c.additional paid-in capital appears under the sub-section paid-in capital

d.dividends in arrears will appear as a restriction of retained earnings

17) ace company is a retailer operating in an industry that experiences inflation (rising

prices). ace wants to maintain a high current ratio. which inventory costing method

should ace consider using?

a.lifo

b.average

c.fifo

d.no inventory costing method directly affects the current ratio

18) the following totals for the month of april were taken from the payroll register of

metz company.

the entry to record accrual of employers payroll taxes would include a

a.debit to payroll tax expense for $2,693

b.credit to payroll tax expense for $2,693

c.credit to fica taxes payable for $1,160

d.credit to payroll tax expense for $1,160

19) which of the following accounts has a normal credit balance?

a.sales returns and allowances

b.sales discounts

c.sales revenue

d.cost of goods sold

20) the declaration and distribution of a stock dividend will

a.increase total stockholders equity

b.increase total assets

c.decrease total assets

d.have no effect on total assets

21) all leases are classified as either

a.capital leases or long-term leases

b.capital leases or operating leases

c.operating leases or current leases

d.long-term leases or current leases

22) when the straight-line method of amortization is used for a bond premium, the

amount of interest expense for an interest period is calculated by

a.adding the amount of premium amortized for that period to the amount of cash paid

for interest during the period

b.subtracting the amount of premium amortized for that period from the amount of cash

paid for interest during the period

c.multiplying the face value of the bonds by the stated interest rate

d.multiplying the face value of the bonds by the market interest rate

23) which one of the following items is not a consideration when recording periodic

depreciation expense on plant assets?

a.salvage value

b.estimated useful life

c.cash needed to replace the plant asset

d.cost

24) sara obermeyer decides to open a pizza parlor near the local college campus that

will operate as a corporation. analyze the following transactions for the month of june

in terms of their effect on the basic accounting equation. record each transaction by

increasing (+) or decreasing (-) the dollar amount of each item affected. indicate the

new balance of each item after a transaction is recorded. it is not necessary to identify

the cause of changes in stockholders equity.

(1)sara obermeyer invests $25,000 cash in exchange for common stock to start a pizza

parlor business on june 1 .

(2)purchased equipment for $4,000 paying $2,000 in cash and the remainder due in 30

days.

(3)purchased supplies for $1,200 cash.

(4)received a bill from campus news for $200 for advertising in the campus newspaper.

(5)cash receipts from customers for pizza sales amounted to $1,500.

(6)paid salaries of $200 to student workers.

(7)billed the tiger football team $300 for pizzas ordered.

(8)paid $200 to campus news for advertising that was previously billed in transaction

4 .

(9)sara obermeyer was paid dividends of $1,200.

(10)incurred utility expenses for month on account, $100.

25) the ledger of the ramirez company at the end of the current year shows accounts

receivable of $150,000.

26) moss county bank agrees to lend the sadowski brick company $400,000 on january

1. sadowski brick company signs a $400,000, 6%, 9-month note. what entry will

sadowski brick company make to pay off the note and interest at maturity assuming that

interest has been accrued to september 30?

27) financial statements must be prepared before the closing entries are made.

28) an adjusting entry to a prepaid expense is required to recognize expired expenses.

29) the further removed from the present the future value is, the smaller the

____________.

30) assuming a statement of cash flows is prepared using the indirect method, indicate

the reporting of the transactions and events listed below by major categories on the

statement. use the following code letters to indicate the appropriate category under

which the item would appear on the statement of cash flows.