Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1) economic events that require recording in the financial statements are called
accounting transactions.
2) the sale of shares in a corporation by one stockholder to another affects the total
capital of the corporation.
3) most notes are not interest bearing.
4) salvage value is not subtracted from plant asset cost in determining depreciation
expense under the declining-balance method of depreciation.
5) a stock split results in a transfer at market value from retained earnings to paid-in
capital.
6) the depreciable cost of a plant asset is its original cost minus obsolescence.
7) as soon as a corporation is authorized to sell stock, an accounting journal entry
should be made recording the total value of the shares authorized.
8) the direct write-off method of recognizing uncollectible account is not in accordance
with good accounting practice.
9) the statement of cash flows is divided into two sections corresponding to investing
activities and financing activities.
10) paid-in capital is the amount paid in to the corporation by stockholders in exchange
for shares of ownership.
11) the economic entity assumption states that assets should be recorded at their cost.
12) under the periodic system, when a customer returns goods, purchases returns and
allowances is debited.
13) dividends are classified as an expense.
14) at september 1, 2014, kern enterprises reported a cash balance of $70,000. during
the month, kern collected cash of $30,000 and made disbursements of $50,000. at
september 30, 2014, the cash balance is
a.$20,000 credit.
b.$50,000 credit.
c.$100,000 debit.
d.$50,000 debit.
15) the best interpretation of the word credit is the
a.offset side of an account.
b.increase side of an account.
c.right side of an account.
d.decrease side of an account.
16) assume that ogleby corp. acquires 35% of crisp corp. for $300,000 on january 1,
2012. if crisp declares and pays $100,000 in total dividends on february 14th, the
journal entry would include a credit to
a.dividend revenue for $100,000
b.dividend revenue for $35,000
c.stock investments for $35,000
d.none of the above
17) indicate in the space provided by each item whether it would appear on the
statement of cash flows as a(n): (o) operating activity, (i) investing activity, or (f)
financing activity.
a. cash receipts from customers.
b. issuance of common stock for cash.
c. payment of cash dividends.
d. cash purchase of equipment.
e. cash payments to suppliers.
f. sale of old machine for cash.
18) the direct write-off method of accounting for uncollectible accounts
a.emphasizes the matching of expenses with revenues
b.emphasizes balance sheet relationships
c.emphasizes cash realizable value
d.is not generally accepted as a basis for estimating bad debts
19) which depreciation method is most frequently used in businesses today?
a.straight-line
b.declining-balance
c.units-of-activity
d.double-declining-balance
20) the maturity value of a $30,000, 9%, 40-day note receivable dated july 3 is
a.$30,000
b.$33,000
c.$32,700
d.$30,300
21) which of the following is a true statement about inventory systems?
a.periodic inventory systems require more detailed inventory records
b.perpetual inventory systems require more detailed inventory records
c.a periodic system requires cost of goods sold be determined after each sale
d.a perpetual system determines cost of goods sold only at the end of the accounting
period
22) adams company is a retailer and uses a perpetual inventory system. which statement
is correct?
a.returns of merchandise inventory by adams company to a manufacturer are credited to
inventory
b.freight paid to get merchandise inventory to adams companys store is debited to
freight expense
c.a return of merchandise inventory by one of adams companys customers is credited to
inventory
d.discounts taken by adams companys customers are credited to inventory
23) using the allowance method, the uncollectible accounts for the year is estimated to
be $35,000. if the balance for the allowance for doubtful accounts is a $9,000 debit
before adjustment, what is the amount of bad debt expense for the period?
a.$9,000
b.$26,000
c.$35,000
d.$44,000
24) bad debts expense is considered
a.an avoidable cost in doing business on a credit basis
b.an internal control weakness
c.a necessary risk of doing business on a credit basis
d.avoidable unless there is a recession
25) which of the following statements is not true?
a.expenses increase stockholders equity.
b.expenses have normal debit balances.
c.expenses decrease stockholders equity.
d.expenses are a negative factor in the computation of net income.
26) the ________________ method of computing depreciation expense results in an
equal amount of periodic depreciation throughout the useful life of the plant asset.
27) condensed income statements for werly corporation are shown below for two years.
compute the corrected net income for 2011 and 2012 assuming that the inventory as of
the end of 2011 was mistakenly overstated by $3,000.
28) a company uses the periodic inventory method and the beginning inventory is
overstated by $4,000 because the ending inventory in the previous period was
overstated by $4,000; the ending inventory for this period is correct. the amounts
reflected in the current end of the period balance sheet are
29) starr company earns 12% on an investment that will return $500,000 eleven years
from now. what is the amount that starr company should invest now to earn this rate of
return?
30) two methods can be used in accounting for uncollectible accounts. identify and
contrast the two methods. how do the methods differ regarding the time periods in
which bad debts expense is recognized?
31) allowance for doubtful accounts is a _____________ account which is
______________ from accounts receivable on the balance sheet.
