1) Gary Kraen Company purchased equipment on May 1, 2014 for $100,000. The
residual value is $10,000 and the estimated useful life is 10 years. What is the
Depreciation Expense for the year ending December 31, 2015, if the company uses the
double-declining-balance method?
A) $13,333
B) $16,000
C) $17,333
D) $20,000
2) When calculating earnings per share, preferred dividends are:
A) added to net income in the numerator of the EPS calculation
B) added to common shares in the denominator of the EPS calculation
C) subtracted from common shares in the denominator of the EPS calculation
D) subtracted from net income in the numerator of the EPS calculation
3) A company did not record the receipt and payment of an utility bill for $500 Is the
trial balance out of balance?
A) No
B) Yes, by $500
C) Yes, by $1,000
D) Yes, by an indeterminate amount
4) Michael Company reports the following account balances at the end of the first year
of operations:
What are total liabilities at the end of the first year?
A) $37,000
B) $50,000
C) $62,000
D) $100,000
5) Bonds in a particular issue which mature in installments over a period of time are
called:
A) serial bonds
B) term bonds
C) callable bonds
D) convertible bonds
6) Bloom Corporation issued 20,000 shares of common stock. Bloom purchased 2,000
shares and later reissued 1,000 shares. How many shares are issued and outstanding?
A) 18,000 issued and 18,000 outstanding
B) 20,000 issued and 18,000 outstanding
C) 19,000 issued and 19,000 outstanding
D) 20,000 issued and 19,000 outstanding
7) Daniel Company purchased 30% of the outstanding shares of Clooney Corporation
on January 1 at a cost of $600,000. Clooney Corporation reported net income of
$95,000 and paid total dividends of $25,000 for the year. At the end of the year,
Clooney shares had a current fair value of $590,000. After all necessary adjusting
entries are made for the year, the balance in Daniel Company’s Equity-Method
Investment account will be:
A) $590,000
B) $621,000
C) $628,500
D) $638,500
8) Barbarino Corporation purchased land and a building for $800,000. An appraisal
indicates that the land’s market value is $400,000 and the building’s market value is
$600,000. When recording this transaction Barbarino should debit:
A) Land for $400,000
B) Land for $320,000
C) Building for $600,000
D) Building for $500,000
9) Dole Company uses the periodic inventory system. At the end of the accounting
period, ending inventory is $10,000 and beginning inventory is $5,000. Purchases for
the period are $99,000. How many journal entries are necessary at the end of the
accounting period?
A) none
B) one
C) two
D) three
10) If economic value added (EVA) is negative:
A) stockholders’ wealth has decreased
B) stockholders’ wealth has increased
C) stockholders’ wealth has stayed the same
D) stockholders’ earnings per share have increased
11) When a note matures:
A) the debtor must pay the creditor only the interest on the note
B) the creditor must pay the debtor only the interest on the note
C) the debtor must pay the creditor the maturity value of the note
D) the creditor must pay the debtor the maturity value of the note
12) Marjorie Corporation acquired a building on January 1, 2015, for $500,000. The
building had an estimated useful life of 20 years and an estimated salvage value of
$25,000. On January 1, 2017, Marjorie Corporation determined that the building could
only be used for another 10 years and there would be no salvage value. Compute
depreciation expense for the year ending December 31, 2017, if Marjorie Corporation
uses straight-line depreciation.
A) $40,000
B) $45,000
C) $45,250
D) $47,500
13) The interest rate that investors require for loaning their money is referred to as:
A) the coupon rate of interest
B) the market rate of interest
C) the stated rate of interest
D) the discount rate of interest
14) Prepaid expenses will:
A) become expenses when their future benefits expire
B) become revenues when their future benefits expire
C) become liabilities when their future benefits expire
D) become assets when their future benefits expire
15) Consolidated financial statements are prepared for:
A) balance sheet and income statement only
B) statement of cash flows and statement of stockholders’ equity only
C) balance sheet, income statement and statement of cash flows only
D) balance sheet, income statement, statement of cash flows and statement of
stockholders’ equity
16) Which is the CORRECT order for items to appear on the income statement?
A) Sales revenue, operating expenses, gross profit, net income
B) Sales revenue, gross profit, net income, operating expenses
C) Sales revenue, gross profit, cost of goods sold, operating expenses
D) Sales revenue, cost of goods sold, gross profit, operating expenses
17) A company reports basic earnings per share of $5.00 per share. The company has
convertible preferred stock that can be converted into common stock. What will fully
diluted earnings per share equal?
A) $5.00 per share
B) more than $5.00 per share
C) less than $5.00 per share
D) There is not enough information
18) Red flags in financial statement analysis can include all of the following EXCEPT:
A) a debt ratio higher than average B) a slowdown in inventory turnover C) days’ sales
in receivables increasing D) Net Cash Provided by Operating Activities exceeds net
income
19) A share of 5% preferred stock has a par value of $50 and market value of $80. The
owners of the preferred stock will receive a dividend of:
A) $2.50 per share
B) $4.00 per share
C) $5 per share
D) $50 per share
20) The CEO of Clarkson Company owns a vacation home in Hawaii. Clarkson
Company owns a factory in Detroit where they are headquartered. Which of these
properties is considered an asset(s) of the business?
A) Only the vacation home in Hawaii
B) Only the factory in Detroit
C) Both the vacation home in Hawaii and the factory in Detroit
D) Neither the vacation home in Hawaii nor the factory in Detroit
21) Michigan Bank lends Detroit Furniture Company $100,000 on December 1. Detroit
Furniture Company signs a $100,000, 9%, 4-month note. The total cash paid for interest
(only) at maturity of the note is:
A) $1,000
B) $3,000
C) $6,000
D) $9,000
22) A company has a beginning inventory of $40,000 and purchases during the year of
$120,000. The beginning inventory consisted of 3,000 units and 7,000 units were
purchased during the year. 3,480 units remain in ending inventory. The cost of the
ending inventory using the average-cost method will be:
A) $13,920
B) $46,400
C) $55,680
D) $59,657
23) Which of the following is a CORRECT statement regarding intangible assets?
A) The useful life of a patent can be longer than its legal life
B) Patents protect computer software programs
C) Trademarks are rights to reproduce and sell a work of art
D) Intangible assets with indefinite lives must be checked annually for any loss in value
24) The Shepherd Company has the following information available at December 31,
2015:
What are the total long-term assets at December 31, 2015?
A) $37,500
B) $40,000
C) $46,000
D) $50,000
25) The Allowance to Adjust Investment in Available-for-Sale Securities to Market
account has a current credit balance of $892. Long-term available-for-sale investments
with a cost of $17,000 have a current fair value of $18,500. The adjusting entry will
require a:
A) credit to Allowance to Adjust Investment in Available-for-Sale Securities to Market
for $608
B) credit to Allowance to Adjust Investment in Available-for-Sale Securities to Market
for $2,392
C) debit to Allowance to Adjust Investment in Available-for-Sale Securities to Market
for $608
D) debit to Allowance to Adjust Investment in Available-for-Sale Securities to Market
for $2,392
26) On a multiple-step income statement, the phrase “Net Interest Expense, Net” refers
to:
A) Interest Expense only
B) Interest Income only
C) Interest Expense minus Interest Income
D) none of the above