Issued a twenty-year mortgage note for cash. Use the following codes to indicate how
the cash flow effect, if any, of each transaction or event would be reported on a
statement of cash flows if the operating activities section is prepared using the indirect
method. (Choices may be used more than once.)
a. Operating activity-add to net income
b. Operating activity-deduct from net income
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
Which one of the following statements is true if a company’s collection period for
accounts receivable is unacceptably long?
a. The collection cost would be reduced.
b. The company may offer sales discounts to shorten the collection period.
c. Cash flows from operations may be higher than expected for the company’s sales.
d. The company should expand operations with its excess cash.
A corporation reported the following information at December 31, 2014:
A) How many shares of preferred stock are issued?
B) How many shares of common stock are issued?
C) How many shares of preferred stock are outstanding?
D) How many shares of common stock are outstanding?
E) How many of the preferred shares will receive dividends if they are paid?
F) How many of the common shares will receive dividends if they are paid?
G) What is the stated dividend per share on the preferred stock?
H) What is the total amount of dividends to be paid to preferred stockholders this year?
I) If all of the preferred stock was issued at the same price, what was the issue price per
share?
J) If all of the common stock were issued at the same price, what was the issue price per
share?
A company follows the qualitative characteristic of consistency. This means that
a. For expenses, the company uses the same account names as used by its competitors.
b. The company has elected certain accounting principles that can never be changed.
c. The company applies the same accounting principles each period.
d. The company applies the same accounting principles as its competitors.
Authorization for the corporation to redeem preferred shares in the future. Match the
terms to the definitions.
Money due the company from another business or individual.
Match each statement to the item listed below
a. Accounts receivable e. Notes receivable
b. Aging method f. Realized
c. Allowance for Doubtful Accounts g. Securitization
d. Earned
Which of the following is not a generally recognized internal control activity?
a. separation of the custody and record keeping responsibilities for any business activity
b. internal review of business transactions by the board of directors
c. internal review of business transactions by the internal auditors
d. independent verification of the work of one employee by another employee
Tangible operating assets used in the normal operations of a business Match these terms
with their correct definition.
a. Franchise e. Organizational costs
b. Intangible operating assets f. Property, plant, and equipment
c. Natural resources g. Trademark
d. Operating assets h. Voluntary disposal
Refer to Landmark Company. The company’s total capital stock is
Landmark Company
This company reported the following information in the stockholders’ equity section of
its December 31, 2014, balance sheet:
a. $ 650,000.
b. $ 675,000.
c. $ 625,000.
d. $1,500,000.
Allatoona Landing reported net credit sales of $1,250,000 and cost of goods sold of
$900,000 for 2013. Its beginning balance of Accounts Receivable was $175,000. The
accounts receivable balance decreased by $25,000 during 2013. Rounded to two
decimal places, what is the company’s accounts receivable turnover rate for 2013?
a. 7.14
b. 7.69
c. 8.33
d. 11.03
Costs incurred after putting the asset into service which keep the asset in normal
operating condition.
For each of the following items, indicate whether each would be treated as capital
expenditure or revenue expenditure. (Choices may be used more than once.)
A corporation reported net income of $60,000, declared and paid cash dividends of
$80,000, and issued 3,000 shares of $2 par common stock at $15 per share during the
year. What total effects would these transactions have on the following stockholders’
equity accounts? Retained EarningsCommon Stock
a. increase increase
b. increase decrease
c. decrease decrease
d. decrease increase
Term used to refer to the right side of an account.
Match the following terms with their correct definition.
a. Account f. Debit
b. Accounting cycle g. Event
c. Chart of accounts h. General ledger
d. Cost vs. benefit i. Journal
e. Credit j. Trial balance
On January 1, 2013, a company sold a piece of equipment for $30,000 which it had
used for several years. The equipment had cost $45,000, and its accumulated
depreciation amounted to $20,000 at the time of the sale. What are the net effects on the
accounting equation of selling the equipment?
a. Assets and Shareholders’ Equity increase $30,000
b. Assets decrease and Shareholders’ Equity increases $5,000.
c. Assets and Shareholders’ Equity increase $5,000.
d. Assets and Shareholders’ Equity decrease $5,000.
A company purchased equipment at the beginning of 2013 for $21,000 and decided to
depreciate it over a 5-year period using the straight-line method. The equipment’s
residual value was estimated at $1,000. The estimated fair market value at the end of
2013 was $20,000. Which of the following statements is correct at December 31, 2013?
a. The balance in the Equipment account is $17,000.
b. The book value of the equipment is $17,000.
c. The total accumulated depreciation is $4,200.
d. The equipment will be reported on the balance sheet at it fair market value of
$20,000.
An even more conservative short-term liquidity ratio than the quick ratio.Match these
terms to their correct definition.
Net sales less cost of goods sold expense
Match each statement to the item listed below.
a. Current assets e. Intangible assets
b. Current liabilities f. Long-term investments
c. Gross margin g. Long-term liabilities
d. Income from operations h. Net profit margin
Finnegan’s Fixtures purchased molding machines at the beginning of 2012 for $10,000.
The machines have an estimated residual value of $2,000 and an estimated life of 5
years or 50,000 hours of operation. The company is considering alternative depreciation
methods. Calculate the following: A) Accumulated depreciation at December 31, 2013,
using the straight-line depreciation method.
B) Depreciation expense for 2012 using the units-of-production depreciation method.
Assume that the machines are operated for 5,000 hours in 2012 and 8,000 hours in
2013.
C) Book value of the equipment at December 31, 2013, using the
double-declining-balance depreciation method.
D) What are the advantages of using straight-line depreciation for financial reporting
purposes?
An effective system of internal control is critical to protecting a company’s investment
in cash. Identify the five control activities and provide one example that relates to each
control as it would be applied to cash.
A significant disadvantage of financing with debt rather than stock is the fact that the
interest expense on debt is not tax-deductible.
An ____________________ revenue must be recorded when revenue is earned in
advance of receiving cash.
Replacing the old air conditioning unit in the golf shop with a more efficient one,
$20,000 Your accountant has capitalized all of these items and intends to depreciate
them over the appropriate asset’s remaining useful life as originally estimated. Indicate
whether you agree or disagree with your accountant’s treatment of each item. In those
cases where you disagree, state the proper treatment of that expenditure. Use the
following table:
The indirect method of reporting cash flows from operating activities involves
reconciling net income and cash flows from operations.
A liability must be recognized when a business is required to transfer assets or provide
services to another entity at some point in the future for activities that have already
occurred.
An impairment is a temporary decline in the future benefit or service potential of an
asset.