Under IFRS, if inventory is written down to a new lower market value, this cannot be
reversed in later periods.
a. True
b. False
Using the following information, what is the amount of cost of goods sold?
a. $26,900
b. $20,530
c. $28,130
d. $30,210
A trial balance can be as informal as an adding machine tape with the account titles
penciled in next to the debit and credit amounts.
a. True
b. False
How should intangible assets be disclosed on the balance sheet?
a. As a reduction of stockholders’ equity
b. At cost in the current assets section
c. at the estimated market value at the balance sheet date
d. Net of the costs already amortized
When the market value of inventory items has declined below its cost, which method
would be the most appropriate in complying with GAAP?
a. Gross Profit
b. LIFO
c. Lower of Cost or market
d. Retail
Anole Company Anole Company was incorporated as a new business on January 1,
2015. The company is authorized to issue 20,000 shares of $5 par value common stock
and 10,000 shares of 6%, $10 par value, cumulative, participating preferred stock. On
January 1, 2015, the company issued 8,000 shares of common stock for $15 per share
and 2,000 shares of preferred stock for $30 per share. Net income for the year ended
December 31, 2015, was $375,000. Refer to the information about Anole Company.
Anole’s total stockholders’ equity reported on the balance sheet at December 31, 2015,
is
a. $ 60,000.
b. $120,000.
c. $180,000.
d. $555,000.
Squidly Products sold and delivered modems to Detail Solutions for $6,600 to be paid
by Detail Solutions in three equal installments over the next three months. The journal
entry made by Squidly to record this transaction will include:
a. A credit to Cash for $6,600.
b. A debit to Accounts Receivable for $6,600.
c. A debit to Accounts Receivable for $2,200.
d. A debit to Sales Revenue for $6,600.
Companies prepare classified financial statements because they are required by
international accounting principles.
a. True
b. False
Select the term from the list below that matches each of the following six descriptions.
a. Interest
b. Maturity value
c. Principal
d. Payee
e. Discounting
f. Term
g. Recourse
h. Implicit
i. Maker
Transfer a note with a contingent liability
The maker of a note recognizes a note receivable on the balance sheet and interest
revenue on its income statement.
a. True
b. False
If Llama Company has paid out more in dividends than it has had in net income, over
the lifetime of the company, then the balances in the Stockholders’ Equity should show:
a. a debit balance in the Retained Earnings account.
b. a credit balance in the Retained Earnings account.
c. a debit balance in the Common Stock account.
d. a credit balance in the Common Stock account.
Which one of the following statements is false regarding the gross profit ratio?
a. The gross profit ratio is calculated by dividing net sales by gross profit.
b. The gross profit ratio is a measure of profitability.
c. The gross profit ratio can help investors decide whether or not to buy a company’s
stock.
d. The gross profit ratio should be compared with both a company’s prior years’ ratios
and also competitor ratios.
Which pair of accounts has the same set of rules for debit and credit entries?
a. Common Stock (Capital Stock) and Accounts Payable
b. Salaries Expense and Retained Earnings
c. Cash and Notes Payable
d. Sales Revenue and Accounts Receivable
Select the letter of the term each statement best describes.
a. authorized shares
b. issued shares
c. outstanding shares
d. par value
e. additional paid-in capital
f. retained earnings
g. cumulative feature
h. participating feature
i. callable stock
j. treasury stock
k. retirement of stock
l. dividend payout ratio
m. stock dividend
n. stock split
o. market value per share
p. convertible stock
q. book value per share
Net income that has been earned by the corporation but not paid out as dividends.
Most merchandisers receive checks and currency from customers in two ways: (1) cash
received over the counter from cash sales and (2) cash received in the mail from credit
sales.
a. True
b. False
Cash equivalents are investments that are readily convertible to a known amount of
cash, where readily means six months or less.
a. True
b. False
Select the letter of the term each statement best describes.
a. authorized shares
b. issued shares
c. outstanding shares
d. par value
e. additional paid-in capital
f. retained earnings
g. cumulative feature
h. participating feature
i. callable stock
j. treasury stock
k. retirement of stock
l. dividend payout ratio
m. stock dividend
n. stock split
o. market value per share
p. convertible stock
q. book value per share
Stock issued by the firm then repurchased but not retired.
Which of the following statements is true concerning the matching principle?
a. All costs can be directly matched with revenue.
b. All costs can be indirectly matched with periods in which they provide a benefit.
c. The association of assets for a period with the liabilities necessary to generate the
assets is known as the matching principle.
d. Cost of goods sold matched with sales revenue is a classic example of direct
matching under the matching principle.
The current balance sheet of Sanders Inc. reports total assets of $20 million, total
liabilities of $2 million, and owners’ equity of $18 million. Sanders Inc. is considering
several financing possibilities in order to expand operations. If Sanders Inc.’s owner
invests an additional $2 million to finance the expansion, the debt to equity ratio will
a. stay the same
b. decrease
c. increase
d. cannot be determined from this information.
Several transactions of sales and purchase activities for Genoa Department Store are
described below. A) Genoa purchases shoes from Nike on credit.
B) Genoa returns defective shoes to Nike before payment is made to Nike for the shoes
purchased in transaction A.
C) Genoa pays for the shoes purchased from Nike.
D) Genoa sells shoes to its customers for cash and on credit.
E) Credit customers return shoes to Genoa for a refund.
F) Credit customers pay their account balances to Genoa. REQUIRED : For each
transaction described above, describe the economic effects of the transaction on the
company under a periodic inventory system.