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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.
category
1>common stock is issued for cash at an amount above par value
2>merchandise inventory increased during the period
3>depreciation expense recorded for the period
4>building was purchased for cash
5>bonds payable were acquired and retired at their carrying value
6>accounts payable decreased during the period
7>prepaid expenses decreased during the period
8>treasury stock was acquired for cash
9>land is sold for cash at an amount equal to book value
10>patent amortization expense recorded for a period
31) with the exception of land, plant assets experience a ______________ in service
potential over their useful lives.
32) ramos company receives a payment on account from martinez industries. based on
the original sale of $6,000 using the periodic inventory approach, ramos honors the 3%
cash discount and records the payment. which of the following is the correct entry for
ramos to record?
