1) gunselman company purchased a machine on january 1, 2012. in addition to the
purchase price paid, the following additional costs were incurred:
(a)sales tax paid on the purchase price,
(b)transportation and insurance costs while the machinery was in transit from the seller,
(c)personnel training costs for initial operation of the machinery,
(d)installation costs necessary to secure the machinery to the building flooring,
(e)major overhaul to extend the life of the machinery,
(f)lubrication of the machinery gearing before the machinery was placed into service,
(g)lubrication of the machinery gearing after the machinery was placed into service, and
(h)annual city operating license.
instructions
indicate whether the items (a) through (h) are capital or revenue expenditures in the
spaces provided: c = capital, r = revenue.
2) horizontal analysis is a technique for evaluating financial statement data
a.within a period of time
b.over a period of time
c.on a certain date
d.as it may appear in the future
3) which of the following statements is true about investments classified as trading
securities?
a.the investors intent and ability is to hold them to maturity
b.they are valued on the balance sheet at cost
c.they can consist of debt, but not equity, securities
d.changes in market value are reflected as part of net income
4) trading securities are reported on the balance sheet at
a.fair value
b.cost
c.cost, adjusted for the effects of interest
d.lower of cost or market
5) indicate in the space by letter whether each statement below applies to a sole
proprietorship (s), partnership (p), or corporation (c). more than one answer may be
appropriate.
a. simple to establish.
b. shared control.
c. easy to transfer ownership.
d. no personal liability.
e. tax advantage.
f. easier to raise funds.
6) cash equivalents are defined by ifrs as
a.cash on hand
b.demand deposits
c.cash on hand and demand deposits
d.short-term, highly liquid investments that are readily convertible into known amounts
of cash
7) paid-in capital in excess of stated value would appear on a balance sheet under the
category
a.capital stock
b.retained earnings
c.additional paid-in capital
d.contra to stockholders equity
8) the respective normal account balances of sales, sales returns and allowances, and
sales discounts are
a.credit, credit, credit
b.debit, credit, debit
c.credit, debit, debit
d.credit, debit, credit
9) the percentage of receivables basis for estimating uncollectible accounts emphasizes
a.cash realizable value
b.the relationship between accounts receivable and bad debts expense
c.income statement relationships
d.the relationship between sales and accounts receivable
10) an aging of a company’s accounts receivable indicates that $4,000 are estimated to
be uncollectible. if allowance for doubtful accounts has a $1,200 debit balance, the
adjustment to record bad debts for the period will require a
a.debit to bad debts expense for $4,000
b.debit to allowance for doubtful accounts for $5,200
c.debit to bad debts expense for $5,200
d.credit to allowance for doubtful accounts for $4,000
11) in calculating cash flows from operating activities using the indirect method, a gain
on the sale of equipment is
a.added to net income
b.deducted from net income
c.ignored because it does not affect cash
d.not reported on a statement of cash flows
12) marvin services corporation had the following accounts and balances:
if the balance of the buildings account was $30,000 and the equipment was sold for
$14,000, what would be the total of stockholders’ equity?
a.$26,000
b.$36,000
c.$46,000
d.$50,000
13) higgins company gathered the following reconciling information in preparing its
october bank reconciliation:
the adjusted cash balance per books on october 31 is
a.$9,420
b.$8,020
c.$5,720
d.$9,720
14) after the physical inventory is completed,
a.quantities are listed on inventory summary sheets
b.quantities are entered into various general ledger inventory accounts
c.the accuracy of the inventory summary sheets is checked by the person listing the
quantities on the sheets
d.unit costs are determined by dividing the quantities on the summary sheets by the
total inventory costs
15) selected data from 2011 financial statements of xi corporation include the following
(amount in millions):
the debt to total assets ratio is
a.70.8%
b.53.3%
c.1.41%
d.6.2 times
16) a measure of profitability is the
a.current ratio
b.debt to total assets ratio
c.earnings per share
d.working capital
17) a law firm received $2,000 cash for legal services to be rendered in the future. the
full amount was credited to the liability account unearned service revenue. if the legal
services have been rendered at the end of the accounting period and no adjusting entry
is made, this would cause:
a.expenses to be overstated
b.net income to be overstated
c.liabilities to be understated
d.revenues to be understated
18) dividends in arrears are dividends on
a.cumulative preferred stock that have been declared but have not been paid
b.non-cumulative preferred stock that have not been declared for a given period of time
c.cumulative preferred stock that have not been declared for a given period of time
d.common dividends that have been declared but have not yet been paid
19) the following partial amortization schedule is available for courtney company who
sold $300,000, five-year, 10% bonds on january 1, 2012 for $312,000 and uses annual
straight-line amortization.
which of the following amounts should be shown in cell (v)?
a.$314,400
b.$313,200
c.$309,600
d.$310,800