The preparation of financial statements requires that the information be understandable
a. Only to CPAs.
b. To those willing to spend the time to understand it.
c. Only to those who take an accounting course.
d. Only to financial analysts and brokers.
Cash dividends become a liability to a corporation on the date of record.
a. True
b. False
Cash flows from acquiring and disposing of long-term assets are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. purchasing activities.
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
The maximum number of shares a corporation may issue as indicated in the corporate
charter.
The terms of a lease can only be structured in one way to meet the lessor and lessee and
satisfy accounting standards.
a. True
b. False
Which of the following transactions involves an accrued asset?
a. Wages earned by employees but not yet paid
b. Rent collected in advance from a tenant
c. Rent owed by a tenant but not yet collected
d. One year’s premium on life insurance policy paid in advance
Given that Carlson Corp.’s current ratio is 3 to 2, what is the effect of obtaining a patent
from the inventor in exchange for shares of stock in Carlson Corp.?
a. The current ratio would increase.
b. The current ratio would decrease.
c. The current ratio would remain the same.
d. Unable to determine.
When an inventory system updates the Inventory account at the time of each sale, this is
known as:
a. a periodic system
b. a contra-purchase system
c. a perpetual system
d. an accrual system
Herndon Corp. purchased merchandise on account from Likert Corp. on November 18,
2014. On November 21, 2014, Herndon returned damaged merchandise to Likert and
was granted an adjustment on its account. Herndon uses the periodic inventory system.
What effect does the merchandise return have on Herndon’s accounting equation?
a. Assets and stockholders’ equity decrease.
b. Assets and liabilities decrease.
c. Liabilities decrease and stockholders’ equity increases.
d. Liabilities and stockholders’ equity decrease.
The following unadjusted amounts were taken from Ruben Gifts’ accounting records at
December 31, 2015:
A) Determine the effects on the accounting equation of any adjusting entries necessary
for Ruben Gifts at December 31, 2015, for both of the following transactions: 1) During
December of 2015, Ruben Gifts had received payments from tenants that were renting
storage space in its warehouse. The payments received by Ruben Gifts were for the
period December, 2015, and January, 2016. 2) At the end of the year, Ruben Gifts
determined that $240 of office supplies remained on hand.
B) What is the effect of omitting these adjustments on the current year’s net income?
Classify the following items according to the financial statement on which each
belongs, either the income statement (IS) or the balance sheet (BS). Also indicate
whether each is a revenue (R), expense (E), asset (A), liability (L), or owners’ equity
(OE) item.
An objective of financial reporting is to reflect economic information concerning a
company’s cash flows.
a. True
b. False
Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland
must
a. record the $500,000 acquisition cost in an account called Land and Buildings.
b. depreciate the $500,000 acquisition cost, less any residual value, over the expected
useful life of the building.
c. because part of the purchase involved land, record all of the cost in the Land account.
d. allocate the $500,000 acquisition cost to separate Land and Buildings accounts based
on their respective fair market values.
The quality of accounting information that allows a user to compare two or more
accounting periods for a single company is known as consistency.
a. True
b. False
A cost can be an asset or expense depending on whether the future economic benefits
have expired or not.
a. True
b. False