1) Checks presented for payment and paid by the bank are known as
A.Canceled checks
B.Certified checks
C.NSF checks
D.Outstanding checks
2) Effective cash management and control includes all of the following except
A.The use of a petty cash fund
B.Bank reconciliations
C.Short-term investments of excess cash
D.Purchase of stocks and bonds
3) Which of the following is true concerning discontinued operations?
A.Only the gain or loss is reported on the income statement.
B.It must be both unusual in nature and infrequent in occurrence.
C.Analysts would not normally include this item in making their decisions.
D.Net income or loss from prior years must also be disclosed in the year of disposition.
4) Which of the following items will be found in a corporate annual report?
A.Company budgets
B.Notes to the financial statements
C.Selected financial data from competitor companies
D.Managements statement that the auditors are responsible for the financial statements.
5) In 2014, Stockwell, Inc. sold 1,000 carpets for $50 each. The carpets carry a 2-year
warranty for repairs. Stockwell estimates that repair costs will average 2% of the total
selling price. What is the amount that would be recorded in the warranty liability
account as a result of selling the carpets during 2014?
A.$1,000
B.$ 500
C.$ 20
D.No liability should be recorded until the carpets are returned for repairs.
6) Which of the following is false regarding the issue of stock versus the issue of bonds
to raise capital?
A.The issuance of stock decreases several important financial ratios
B.Issuing bonds dilutes the voting power of the stockholders
C.Corporations are not required to return the investment to the stockholders
D.Investors expect to earn a higher rate of return on stocks than bonds
7) Cash flows from acquiring and selling products are classified as
A.operating activities
B.investing activities
C.financing activities
D.distribution activities
8)
9) Which of the following best describes a companys operating activities?
A.Operating activities focus on the sale of products and services
B.Operating activities are necessary to provide the money to start a business
C.Operating activities are needed to provide the valuable assets required to run a
business
D.Operating activities represent the right to receive a benefit in the future
10) On January 2, 2013, Morrisville Corporation sold $750,000 of bonds for $745,000.
The bonds will mature in 10 years and pay interest annually on December 31.
Morrisville properly recorded the payment of interest and amortization of the discount
using the effective interest method. Which of the following statements is true about the
carrying value of the bonds and/or the unamortized discount at the end of 2013?
A.The carrying value will be less than $745,000
B.The carrying value will be $745,000
C.The carrying value will be greater than $745,000
D.The unamortized premium will be less than $5,000
11) When using the direct method, how is the issuance of stock for cash shown on the
statement of cash flows?
A.Operating activity
B.Investing activity
C.Financing activity
D.Noncash investing and financing activity
12) Which one of the following statements best describes the term outstanding check?
A.A check written by the company and presented to the bank for payment
B.A check written by the company but not yet presented to the bank for payment
C.A check written by a customer that has been presented to the bank for payment
D.A check written by a customer that has not yet been presented to the bank for
payment
13)
Determine the net income (loss) for the period.
A.Net Loss $5,570
B.Net Income $3,180
C.Net Loss $790
D.Net Income $2,390
14) Which of the following would be internal users of accounting information?
A.Customers and vendors
B.Employees and managers
C.Government and banks
D.Employees and customers
15) On January 1, 2012, Breaker, Inc. issued $400,000, 10-year, 10% bonds for
$354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%.
The interest expense on the bonds at June 30, 2013 is
A.$20,000
B.$24,000
C.$21,252
D.$17,710
16) Which of the following best describes the term retained earnings?
A.The amount of total profits earned by a business since it began operations
B.The amount of interest or claim that the owners have on the assets of the business
C.The future economic resources of a business entity
D.The cumulative profits earned by the business less any dividends distributed
17) Cripple Creek Inc.
Use the information presented below for Cripple Creek, Inc. for 2013 and 2012 to
answer the questions that follow. Cripple Creek uses the straight-line depreciation
method.
Refer to the information for Cripple Creek, Inc.
What is the asset turnover ratio for Cripple Creek for 2013?
A.1.60 times
B.1.82 times
C.4.00 times
D.4.55 times
18) For each of the following sentences 3-10, select the word or group of words that
best completes the statement.
The ____________________ of accounting is a system in which revenues are
recognized when payments are received and expenses are recognized when payments
are made.
19) Sarcon Corp. prepares monthly bank reconciliations of its checking account
balance. The bank statement for October, 2014, indicated the following:
An analysis of canceled checks and deposits and the records of Sarcon revealed the
following items:
REQUIRED:
Prepare a bank reconciliation at October 31, 2014 in proper form.
20) Complete the following data taken from the condensed income statements for
merchandising companies: Action, Break, & Connors.
21) Ranier Parts Company has a return on assets of 12% and a return on common
stockholders’ equity of 15%. What causes the difference in the two returns?
22) The objective of the indirect method is to reconcile net income to net cash flow
from _______________________________.
23) The ability of a company to pay its debt as it comes due relates to
____________________.
24) Learning Tree, Inc.
The following data is available for one of the products sold by Learning Tree, Inc.,
which uses the perpetual inventory system:
Refer to the data for Learning Tree, Inc.
Explain why the amounts are different for LIFO under periodic and perpetual inventory
systems.