The income statement is sometimes called the statement of financial position.
a. True
b. False
A check written by a company but not yet presented to the bank for payment is called a
check in transit.
a. True
b. False
On January 1, 2012, the long-term liability section of Eden Company’s balance sheet
showed a balance of $35,000 in the bonds payable account. On December 31, 2012, the
balance in that same account was $20,000. This change would appear on the statement
of cash flows as
a. an outflow of cash of $15,000 in the financing activities category.
b. an inflow of cash of $15,000 in the financing activities category.
c. an outflow of cash of $15,000 in the investing activities category.
d. an inflow of cash of $15,000 in the investing activities category.
Financial statements are intended to tell the reader the value of a company.
a. True
b. False
Slotkin Company buys designer clothing to sell in its retail stores. Since much of the
merchandise comes from Dallas and Europe, Slotkin Company must pay freight charges
to get the merchandise shipped in. Which statement is true?
a. Transportation-in, paid by Slotkin Company, is added to the inventory account under
the periodic system.
b. Transportation-in, paid by Slotkin Company, is subtracted from purchases under the
periodic system.
c. Freight charges are only paid by a buyer in a periodic system.
d. Transportation-in is added to net purchases to determine cost of goods purchased in a
periodic system.
In general, the international accounting standards provide lease criteria that are similar
to the U.S. standards.
a. True
b. False
The issuance of stock decreases a company’s assets and increases its stockholders’
equity.
a. True
b. False
A major advantage of the weighted average method of inventory costing is that
a. Cost flows correspond with the physical flow of merchandise.
b. It is relatively easy to apply.
c. It matches current costs with revenues.
d. Recent costs are assigned to the ending inventory balance.
In countries, like Japan and much of Europe, fewer differences between the amount of
income reported to stockholders and that reported to the taxing authorities exist than in
the U.S.
a. True
b. False
The dollar change and percentage change in the accounts receivable account from 2013
to 2014 is calculated for Allison Corporation. This is an example of
a. horizontal analysis
b. vertical analysis
c. profitability analysis
d. solvency assessment
The Space Corporation began 2015 with $390,000 in assets, $140,000 in liabilities, and
$170,000 of retained earnings the year was $120,000, and dividends of $110,000 were
declared and paid. A) Prepare a statement of retained earnings for 2015. B) What is the
nature or purpose of the statement of retained earnings? C) What was the amount of
capital stock for Space Corporation at the beginning of 2015? D) Identify what business
events might occur in Space Corp.’s business operations that would cause the two
stockholders’ equity items to increase. E) How do you identify whether Space was
profitable during 2015 by examining the statement of retained earnings?
Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an
estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of
operation. The crane was purchased on January 1, 2015 and was used 2,700 hours in
2015 and 2,600 hours in 2016. Refer to the information about Norwood, Inc. What
amount will Norwood, Inc. report as depreciation expense over the 8-year life of the
equipment?
a. $60,000
b. $72,000
c. $75,000
d. $80,000
When using the indirect method, how is the receipt of cash from the sale of long-term
investments treated on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing or financing activity
How would bank service charges be dealt with in a bank reconciliation?
a. added to company’s book balance
b. deducted from company’s book balance
c. added to bank statement balance
d. deducted from bank statement balance
The Stockholders’ Equity section of Sea Scape, Inc.’s balance sheet on January 1, 2015,
appeared as follows:
A) On March 1, 2015, Sea Scape resold 800 shares of treasury stock at $25 per share.
What is the effect of the March 1 transaction on the accounting equation?
B) Why is the excess of the sales price of the 800 shares of treasury stock over the cost
not reported on the income statement?
If a customer returns merchandise which has already been paid for, the retailer may give
either a cash refund or a credit on account.
a. True
b. False
Under the accrual method, expenses are recognized when revenue is earned.
a. True
b. False
When constructing assets, capitalized interest is based on
a. the amount allowed by the company’s auditors.
b. the expenditures at the end of the of the period.
c. the expenditures at the beginning of the period.
d. the average accumulated expenditures.
The definition of a conglomerate is a company that operates in one industry and uses
different inventory valuation techniques.
a. True
b. False