1) net sales minus cost of goods sold is called gross profit.
2) advertising expense appears as a selling expense in the income statement.
3) the cost of an intangible asset must be amortized over a 20-year period.
4) sales revenues, cost of goods sold, and gross profit are amounts on a merchandising
company’s income statement not commonly found on the income statement of a service
company.
5) a cash budget contributes to more effective cash management.
6) in a common size income statement, each item is expressed as a percentage of net
income.
7) if $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a
loss on redemption will be recorded.
8) the current cash debt coverage ratio is computed by dividing net cash provided by
operations by average total liabilities.
9) gaap stands for generally accepted accounting procedures.
10) a primary objective of the statement of cash flows is to show the income or loss on
investing and financing transactions.
11) the journal entry to record the purchase of treasury stock will cause total
stockholders equity to decrease by the amount of the cost of the treasury stock.
12) in periods of falling prices, lifo will result in a higher ending inventory valuation
than fifo.
13) goodwill is recorded only when there is an exchange transaction that involves the
purchase of an entire business.
14) financial information is presented below:
gross profit would be
a.$42,000
b.$35,000
c.$38,000
d.$45,000
15) short-term notes receivable
a.have a related allowance account called allowance for doubtful notes receivable
b.are reported at their gross realizable value
c.use the same estimations and computations as accounts receivable to determine cash
realizable value
d.present the same valuation problems as long-term notes receivables
16) the journal entry to record a credit sale is
a.cash
sales revenue
b.cash
service revenue
c.accounts receivable
sales returns and allowances
d.accounts receivable
sales revenue
17) when bonds are issued at a premium, the total interest cost of the bonds over the life
of the bonds is equal to the amount of
a.interest paid over the life of the bond
b.interest paid over the life of the bond plus the amount of premium at sale point
c.interest paid over the life of the bond minus the amount of premium at sale point
d.premium at sale point
18) the four subdivisions for plant assets are
a.land, land improvements, buildings, and equipment
b.intangibles, land, buildings, and equipment
c.furnishings and fixtures, land, buildings, and equipment
d.property, plant, equipment, and land
19) treasury stock should be reported in the financial statements of a corporation as a(n)
a.investment
b.liability
c.deduction from total paid-in capital
d.deduction from total paid-in capital and retained earnings
20) a disadvantage of the corporate form of business is
a.its status as a separate legal entity
b.continuous existence
c.government regulation
d.ease of transfer of ownership
21) conley company purchased equipment for $40,000 on january 1, 2010, and will use
the double-declining-balance method of depreciation. it is estimated that the equipment
will have a 5-year life and a $2,000 salvage value at the end of its useful life. the
amount of depreciation expense recognized in the year 2012 will be
a.$5,760
b.$9,120
c.$9,600
d.$5,472
22) the information needed to determine whether a company is using accounting
methods similar to those of its competitors would be found in the
a.auditors report
b.balance sheet
c.management discussion and analysis section
d.notes to the financial statements
23) here is the income statement for gillman, inc.
additional information:
1>common stock outstanding january 1, 2012, was 30,000 shares, and 40,000 shares
were outstanding at december 31, 2012.
2>the market price of gillman, inc., stock was $15.20 in 2012
3>cash dividends of $16,000 were paid, $4,500 of which were to preferred
stockholders.
instructions
compute the following measures for 2012
(a)earnings per share.
(b)price-earnings ratio.
(c)payout ratio.
(d)times interest earned ratio.
24) barnes company showed the following balances at the end of its first year:
what did barnes company show as total credits on its trial balance?
a.$37,100
b.$36,400
c.$35,700
d.$37,800
25) which of the following is not true of a corporation?
a.it may buy, own, and sell property
b.it may sue and be sued
c.the acts of its owners bind the corporation
d.it may enter into binding legal contracts in its own name
26) reeves company is taking a physical inventory on march 31, the last day of its fiscal
year. which of the following must be included in this inventory count?
a.goods in transit to reeves, fob destination
b.goods that reeves is holding on consignment for parker company
c.goods in transit that reeves has sold to smith company, fob shipping point
d.goods that reeves is holding in inventory on march 31 for which the related accounts
payable is 15 days past due
27) hogan co. purchased 50, 6% maley company bonds for $50,000 cash plus brokerage
fees of $500. interest is payable semiannually on july 1 and january 1. the entry to
record the purchase would include debit to
a.debt investments for $50,000
b.cash for $50,500
c.debt investments for $50,500
d.investment for $49,500
28) land costing $125,000 was sold for $155,000 cash. the gain on the sale was reported
on the income statement as other income. on the statement of cash flows, what amount
should be reported as an investing activity from the sale of land?
a.$125,000
b.$155,000
c.$185,000
d.$30,000
29) jill clown earned a salary of $500 for the last week of october. she will be paid on
november 1. the adjusting entry for jills employer october 31 is:
30) using the following data for hayes, inc., compute its asset turnover ratio and the
return on assets ratio.
31) what types of information are presented in the notes to the financial statements?
32)
at january 1, 2012, the available-for-sale securities portfolio held by darin corporation
consisted of the following investments:
1>2,500 shares of hacker common stock purchased for $42 per share.
2>1,500 shares of kramer common stock purchased for $50 per share.
at december 31, 2012, the fair values per share were hacker $36 and kramer $54.
instructions
(b)prepare a schedule showing the cost and fair value of the portfolio at december 31,
2012.
(c)prepare the adjusting entry to report the portfolio at fair value at december 31, 2012.
33) companies are continually under pressure to make the numbers to have earnings
that are in line with expectations. explain the terms earnings management and quality of
earnings.
34) at september 1, the balance sheet accounts for kiner’s restaurant were as follows:
the following transactions occurred during the next two days:
stockholders invested an additional $25,000 cash in the business. the accounts payable
were paid in full. (no payment was made on the notes payable.)
instructions
prepare a balance sheet at september 3, 2012.