A cereal company includes one premium coupon in every cereal box. Upon returning
10 such coupons to the company, a customer will be sent a free cereal bowl. In a recent
year, the company sold 200,000 boxes of cereal for $1 a box. It is estimated that 20% of
the coupons will be returned. If the cereal bowls cost the company $3 each, what
amount of liability for premium redemptions must be recorded by the company?
a. $ 6,000
b. $ 12,000
c. $200,000
d. $ 24,000
From the following list, identify whether the change in the account balance during the
year would be reported as an operating (O), an investing (I), or a financing (F) activity
or not separately reported on the statement of cash flows (N). Assume that the indirect
method is used to determine the cash flows from operating activities.
a.O – Operating
b.I – Investing
c.F – Financing
d.N – Not separately reported on the Statement of Cash Flows
Notes payable
Flannery Company uses a worksheet to prepare its statement of cash flows. The
company also uses the indirect method for the Operating Activities section of its
statement. For each of the following changes in the balance sheet, indicate what activity
it affects and whether it is an addition or deduction.
a.Deducted from Operating activity
b.Added to Operating activity
c.Deducted from Investing activity
d.Added to Investing activity
e.Deducted from Financing activity
f.Added to Financing activity
Land increased
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a.Earnings per share
b.Dividend yield ratio
c.Dividend payout ratio
d.Leverage
e.Return on assets ratio
f.Return on common stockholders’ equity ratio
g.Debt-to-equity ratio
h.Price/earnings ratio
A measure of a company’s success in earning a return for all providers of capital.
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a.Earnings per share
b.Dividend yield ratio
c.Dividend payout ratio
d.Leverage
e.Return on assets ratio
f.Return on common stockholders’ equity ratio
g.Debt-to-equity ratio
h.Price/earnings ratio
A company’s bottom line stated on a per-share basis.
The debit balance in Cash Short and Over at the end of an accounting period is reported
as:
a.an expense on the income statement.
b.income on the income statement.
c.an asset on the balance sheet.
d.a liability on the balance sheet.
Match the selected items from a classified balance sheet and multiple-step income
statement to the section in which they would appear on the classified balance sheet or
the income statement.
a.Current Assets (balance sheet)
b.Property, Plant, & Equipment (balance sheet)
c.Current Liabilities (balance sheet)
d.Long-term Liabilities (balance sheet)
e.Stockholders’ Equity (balance sheet)
f.Operating Revenue (income statement)
g.Operating Expenses (income statement)
h.Other Revenue & Expenses (income statement)
i.Income Taxes (income statement)
Buildings
Match the following bond and long-term liability related terms to the appropriate
definition.
a.Long-term liability
b.Face value
c.Debenture bonds
d.Serial bonds
e.Callable bonds
f.Face rate of interest
g.Market rate of interest
h.Bond issue price
i.Premium
j.Discount
k.Effective interest method of amortization
l.Carrying value
m.Gain or loss on redemption
The difference between the carrying value and the redemption price at the time bonds
are redeemed. This amount is presented as an income statement account.
For the following items Questions 220-227, indicate whether each should be (a)
included or (b) excluded from the line item titled Cash and cash equivalents on the
balance sheet.
a.Included
b.Excluded
Corporate bonds maturing in 30 days
Select the action that matches the category of internal control procedures. (Select all
that apply.)
Independent review and appraisal
a.One department should check on another
b.Internal audit staff ensure all is working as intended
c.Accounting and cash collection is properly separated
d.Blank checks are locked at all times when not in use
e.Origination of initial entry into accounting system
f.Specific authority is given by management for the performance of activities
Washington Corp. reported the following information for 2015 and 2016.
If Washington uses the indirect method to prepare the operating activities section of the
statement of cash flows, what amount will be reported as net cash inflow from
operating activities for 2016?
a. $ 73,000
b. $ 83,000
c. $ 95,000
d. $105,000
Match the following bond and long-term liability related terms to the appropriate
definition.
a.Long-term liability
b.Face value
c.Debenture bonds
d.Serial bonds
e.Callable bonds
f.Face rate of interest
g.Market rate of interest
h.Bond issue price
i.Premium
j.Discount
k.Effective interest method of amortization
l.Carrying value
m.Gain or loss on redemption
The face value of a bond plus the amount of unamortized premium or minus the amount
of unamortized discount.
The effect of a misstatement of the year-end inventory is limited to the net income for
that year.
a.True
b.False
When using the indirect method for preparing the statement of cash flows, all of the
following will appear in the operating activities section except:
a.Increase in deferred tax
b.Depreciation expense on leased assets.
c.Interest expense.
d.An increase in long-term liabilities.
Maxim Company sells auto parts. The company employs a periodic inventory system.
Identify all the effects on the accounting equation.
a.Increase in assets
b.Decrease in assets
c.Increase in liabilities
d.Decrease in liabilities
e.Increase on owners’ equity
f.Decrease in owners’ equity
g.Increase in assets and increase in owners’ equity
h.Decrease in assets and decrease in owners’ equity
i.Increase in liabilities and decrease in owners’ equity
j.Decrease in liabilities and increase in owners’ equity
Recorded cash sales for the day.
Match the term with the statement that best defines it.
a.Accounting controls
b.Accounting system
c.Administrative controls
d.Audit committee
e.Board of directors
Procedures concerned with safeguarding the assets or the reliability of financial
statements.
Select the financial statement on which the user would most likely find the answer to
the question given. (Select all that apply.)
Did the company sell any property, plant, and equipment during the year at a gain or
loss? (Focus on just the gain or loss)
a.Income statement
b.Balance sheet
c.Statement of cash flows
d.Statement of retained earnings
Select where the following accounts would be reported on CocaCola’s financial
statements. (Select all that apply.)
Depreciation expense
a.Balance Sheet – Property, Plant, and Equipment
b.Balance Sheet – Intangible Assets
c.Balance Sheet – Current Assets
d.Balance Sheet – Other Assets
e.Income Statement – Operating Section
f.Income Statement – Other Revenue and Expense Section
g.Statement of Cash Flows
Indicate the type of each ratio listed below.
a.Liquidity ratio
b.Solvency ratio
c.Profitability ratio
Debt-to-equity ratio
Lamar Company has total current assets of $122,000 and total current liabilities of
$57,000. What is the amount of working capital for Lamar Company?
a. $57,000
b. $65,000
c. $122,000
d. $179,000