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1) the main difference between intangible assets and property, plant and equipment is
the length of the assets life.
2) the statement of cash flows explains the difference between net income, as shown on
the income statement, and the net cash flows generated from operations.
3) a 3-for-1 common stock split will increase total stockholders equity but reduce the
par or stated value per share of common stock.
4) requiring employees to take vacations is a weakness in the system of internal
controls because it does not promote operational efficiency.
5) the contractual interest rate is always equal to the market rate of interest on the date
that bonds are issued.
6) a current liability must be paid out of current earnings.
7) consolidated financial statements should be prepared only when a subsidiary
company has a controlling interest in the parent company.
8) once cost is established for a plant asset, it becomes the basis of accounting for the
asset unless the asset appreciates in value, in which case, market value becomes the
basis for accountability.
9) in order for information to be relevant, it must be reported on a monthly basis.
10) from an accounting standpoint, the acquisition of long-lived assets is essentially
a(n):
a.accrual of expense
b.accrual of revenue
c.accrual of unearned revenue
d.prepaid expense
11) a company had net income of $940,000. depreciation expense is $104,000. during
the year, accounts receivable and inventory increased $60,000 and $160,000,
respectively. prepaid expenses and accounts payable decreased $8,000 and $16,000,
respectively. there was also a loss on the sale of equipment of $12,000. how much cash
was provided by operating activities?
a.$804,000
b.$828,000
c.$1,124,000
d.$1,172,000
12) which one of the following affects cash during a period?
a.recording depreciation expense
b.declaration of a cash dividend
c.write-off of an uncollectible account receivable
d.payment of an accounts payable
13) on january 1, a machine with a useful life of four years and a residual value of
$8,000 was purchased for $40,000. what is the depreciation expense for year 2 under
straight-line depreciation?
a.$10,000
b.$16,000
c.$8,000
d.$20,000
14) if a gain of $27,000 is incurred in selling (for cash) office equipment having a book
value of $180,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
a.$153,000
b.$180,000
c.$207,000
d.$27,000
15) wilton sells softball equipment. on november 14, they shipped $2,000 worth of
softball uniforms to paola middle school, terms 2/10, n/30. on november 21, they
received an order from douglas high school for $1,200 worth of custom printed bats to
be produced in december. on november 30, paola middle school returned $200 of
defective merchandise. wilton has received no payments from either school as of month
end. what amount will be recognized as net accounts receivable on the balance sheet as
of november 30?
a.$3,200
b.$3,000
c.$2,000
d.$1,800
16) under ifrs, the trial balance
a.follow the same format as under gaap.
b.shows credits on the left and debits on the right.
c.include less accounts than under gaap.
d.include more accounts than under gaap.
17) in periods of inflation, phantom or paper profits may be reported as a result of using
the
a.perpetual inventory method
b.fifo costing assumption
c.lifo costing assumption
d.periodic inventory method
18) automobile audio has the following inventory data:
a physical count of merchandise inventory on november 30 reveals that there are 100
units on hand. ending inventory under fifo is
a.$876
b.$1,692
c.$842
d.$1,726
19) the control principle related to not having the same person authorize and pay for
goods is known as
a.establishment of responsibility
b.independent internal verification
c.separation of duties
d.rotation of duties
20) typically a value below what amount for the current cash debt coverage ratio should
be further investigated?
a.2.0
b.1.4
c.0.6
d.0.4
21) a current asset is
a.the last asset purchased by a business
b.an asset which is currently being used to produce a product or service
c.usually found as a separate classification in the income statement
d.expected to be converted to cash or used in the business within a relatively short
period of time
22) stock dividends and stock splits have the following effects on retained earnings:
23) during the growth phase, a company will start to generate small amounts of cash
_______________.
24) a finance company or bank that purchases receivables from businesses is known as
a ______________.
25) the post-closing trial balance will contain only permanentbalance sheetaccounts.
26) these items are taken from the financial statements of drew corporation for 2012.
retained earnings (beginning of year)$33,000
utilities expense2,000
equipment56,000
accounts payable15,300
cash11,900
salaries and wages payable3,000
common stock13,000
dividends14,000
service revenue74,000
prepaid insurance3,500
repair expense1,800
depreciation expense3,300
accounts receivable14,200
insurance expense2,200
salaries and wages expense47,000
accumulated depreciation17,600
instructions
prepare an income statement, a retained earnings statement, and a classified balance
sheet as of december 31, 2012.
27)
28)
the 2011 income statement for moring company showed rent expense of $8,500 and
wages expense of $9,600. the related balance sheet account balance at year-end last
year and this year were as follows:
calculate the following for 2011:
1>cash paid for rent.
2>cash paid for wages.
29) your friend, james, made this comment: my major is biology and i plan to research
for cures for major illnesses. therefore, i have no need to study accounting. what is your
response to james?
30) the ______________ ratio measures the percentage of earnings distributed in the
form of cash dividends.
