1) the inventory turnover ratio is calculated as cost of goods sold divided by ending
inventory.
2) a stock dividend will cause an increase in total contributed capital at the date the
dividend is declared.
3) a credit balance in a liability account indicates that an error in recording has
occurred.
4) all business transactions must be entered first in the general ledger.
5) sales allowances and sales discounts are both designed to encourage customers to
pay their accounts promptly.
6) when the columns of the trial balance equal each other, it means that no errors have
occurred in the recording and posting the transactions.
7) recording depreciation on plant assets affects the balance sheet and the income
statement.
8) most companies use a retained earnings statement rather than a statement of
stockholders equity.
9) comprehensive income includes all revenues, expenses, gains, losses, and dividends.
10) the retained earnings statement describes the changes in retained earnings during
the period.
11) if any portion of a long-term debt is to be paid in the next year, the entire debt
should be classified as a current liability.
12) an aging schedule is prepared only for old accounts receivables that have been past
due for more than one year.
13) examples of notes are descriptions of the significant accounting policies and
methods used in preparing the statements, explanations of contingencies, and various
statistics.
14) a corporate board of directors does not generally
a.select officers
b.formulate operating policies
c.declare dividends
d.execute policy
15) gregg inc. has an investment in trading securities of $100,000. this investment
experienced an unrealized loss of $6,000 during the current year. assuming a 35% tax
rate, the effect of this loss on comprehensive income will be
a.no effect
b.$100,000 increase
c.$35,000 decrease
d.$67,000 decrease
16) winsor clothing store had a balance in the accounts receivable account of $760,000
at the beginning of the year and a balance of $840,000 at the end of the year. net credit
sales during the year amounted to $6,800,000. the receivables turnover ratio was
a.8.0 times
b.8.3 times
c.8.5 times
d.7.9 times
17) long-term creditors are usually most interested in evaluating
a.liquidity and profitability
b.consistency and profitability
c.liquidity and solvency
d.consistency and solvency
18) when is a physical inventory usually taken?
a.when goods are not being sold or received
b.when the company has its greatest amount of inventory
c.at the end of the companys fiscal year
d.both (b) and (c)
19) which of the following statements is true?
a.earnings per share is an internal measure and is not used by shareholders
b.the denominator used in computing earnings per share represents the shares of
common stock outstanding on the last day of the accounting period
c.net income is not adjusted when computing earnings per share
d.by comparing earnings per share of a single corporation over time, a shareholder can
evaluate the corporations relative earnings performance
20) the following amounts were taken from the financial statements of brandt company:
the times interest earned ratio for 2012 is
a.3.3 times
b.5.0 times
c.4.3 times
d.5.5 times
21) with an interest-bearing note, the amount of assets received upon issuance of the
note is generally
a.equal to the note’s face value
b.greater than the note’s face value
c.less than the note’s face value
d.equal to the note’s maturity value
22) working capital is a measure of
a.consistency
b.liquidity
c.profitability
d.solvency
23) chang company retired bonds with a face amount of 90,000,000 at 98 when the
carrying value of the bond was 89,670,000. the entry to record the retirement would
include a
a.gain on bond redemption of 1,470,000
b.loss on bond redemption of 330,000
c.loss on bond redemption of 1,800,000
d.gain on bond redemption of 2,130,000
24) the declining-balance method is an accelerated method of depreciation. briefly
explain what is meant by an accelerated method of depreciation and justify the choosing
of an accelerated method.
25) identify which of the following reconciling items would require an adjusting entry
to be made by costello company.
1> deposits in transit totaled $2,000.
2> a check written to the company for $350 by grover company was returned nsf.
3> the bank charged the company $46 for printing checks.
4> outstanding checks totaled $1,667.
5> a debit memorandum reported an eft of $178 to paco utilities.
26) why would it be safer for a wealthy individual to set up his or her business as a
corporation rather than as a proprietorship or partnership?
27) an accounting record where transactions are initially recorded in chronological
order is called a ________________.
28) kinney company purchased a truck for $76,000. the company expected the truck to
last four years or 100,000 miles, with an estimated residual value of $8,000 at the end
of that time. during the second year the truck was driven 27,000 miles. compute the
depreciation for the second year under each of the methods below and place your
answers in the blanks provided.