1) Comparing one company with another in the same industry should cause no
problems since companies in the same industry are required to use the same GAAP.
2) A company using the periodic inventory system must total the selling prices of the
units on hand at the end of the period to value the ending inventory.
3) If a company chooses to treat small plant asset expenditures as expenses, GAAP are
being violated.
4) Solvency is concerned with the ability of a company to pay next years debts as they
come due.
5) The all-inclusive income approach requires that all events and transactions that affect
income should be reported on the income statement to help prevent the manipulation of
income.
6) Which of the following is an organization that lends funds to a business entity and
expects repayment of the funds?
A.A partner
B.A stockholder
C.An owner
D.A creditor
7) Halpern Systems Corp. has grown significantly over the past year. One area that has
plagued the Controller of Halpern is the reconciliation of supplies expense. The
end-of-year supplies on hand totaled $20, and purchases totaled $500, and supplies on
hand at the beginning of the year amounted to $200. How much will Halpern Systems
report as supplies expense for the current year?
A.$ 200
B.$ 680
C.$ 220
D.$ 700
8) As used in accounting, the Notes to the Financial Statements should be:
A.Listed with the liabilities on the balance sheet
B.Omitted at the option of the company
C.Included as an integral part of the financial statements
D.Reported as expenses on the Income Statement
9) Satin Corporation
The data presented below is for Satin Corporation for the year ended December 31,
2014.
Refer to information for Satin Corporation
If Satin uses 2% of net credit sales to estimate its bad debts, what will be the balance in
the Allowance for Doubtful Accounts account after the adjustment for bad debts?
A.$33,000
B.$31,800
C.$27,000
D.$25,800
10) Which one of the following is not a generally recognized internal control
procedure?
A.Internal review by the audit committee of the board of directors
B.Independent verification of the work of one employee by another employee
C.Independent review and appraisal by internal auditors
D.Segregation of duties
11) Which one of the following is not one of the three activities included in the
definition of accounting?
A.Communicating
B.Identifying
C.Measuring
D.Operating
12) For which type of inventory would a company most likely use the specific
identification method?
A.Barbie dolls
B.Cartons of milk
C.Custom designed diamond rings
D.Gasoline in storage tanks at a gasoline station
13) On December 31, 2013, Aire Dyne, Inc. reported common stock of $120,000,
retained earnings of $60,000, and total stockholders’ equity equal to $500,000. No
unusual accounts appeared in the stockholders’ equity section of its balance sheet.
During the fiscal year ended December 31, 2014, 10,000 shares of stock were sold for
$40,000, of which $10,000 represented additional paid-in capital. The company
reported net income of $85,000 and declared and paid dividends of $50,000.
A) What is the par value of the stock?
B) What is the amount of the retained earnings at December 31, 2014?
C) Prepare a statement of retained earnings for Aire Dyne, Inc. for the year ended
December 31, 2014, in good form.
14) Which of the following events will cause a companys current ratio to decrease?
A.The sale of inventory for cash
B.The sale of inventory for credit (accounts receivable)
C.Issuing stock for cash
D.Paying off long-term debt with cash
15) Which inventory costing method results in the highest inventory balance during a
period of rising prices?
A.Weighted average cost
B.FIFO
C.LIFO
D.Both FIFO and LIFO result in the same inventory balance
16) Which one of the following is not a contra account?
A.Purchase Returns and Allowances
B.Accumulated Depreciation
C.Transportation-in
D.Sales Discounts
17) Use the following information that was obtained from the 2012 and 2011 financial
statements of Lake Company, River Corporation, and Ocean Company to answer the
questions that follow.
REQUIRED:
Compare the three companies and answer the following:
18) The solution to this problem requires time value of money calculations. Reference
to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
Mackies individual retirement account (IRA) currently has a balance of $100,000 and is
earning 6%. Beginning one year from today, what equal annual amounts can be
withdrawn from the IRA for 10 years so that the balance after the tenth withdrawal is
zero?
A.$10,000
B.$12,950
C.$13,587
D.$14,237
19) Cushion Sports accepted a credit card account receivable in exchange for $5,000 of
services provided to a customer. The credit card company charges a 5% service charge.
Recording the transaction in the companys accounting records will have what effect on
the accounting equation?
A.Increase assets and equity by $4,750
B.Decrease assets and equity by $250
C.Increase assets by $5,000
D.Increase equity by $5,000
20) What situations could cause a decrease in the current ratio, but an increase in the
acid-test ratio? If this happens, is management to be commended or is a problem
evident? Explain
21) ____________________ is the quality of accounting information that allows a user
to analyze two or more companies and look for similarities and differences
22) Mountainside Kafe Corporation
The following is the consolidated statements of income for Mountainside Kafe
Corporation for the years ending December 31, 2013 and 2014
Refer to the consolidated statements of income for Mountainside Kafe Corporation.
REQUIRED: Identify three specific accounts of Mountainside Kafe that might include
expenses accrued as a result of adjustments. Discuss the ‘effects’ of these on the
accounting equation. Ignore amounts.
23) Utah Corp.
Use the following selected data and additional information from the records of Utah
Corp. to answer the questions that follow.
Additional information:
Review the data for Utah Corp.
REQUIRED:
Prepare the operating activities section of a statement of cash flows for Utah Corp. for
2014 if the indirect method is used to determine net cash flow from operating activities
24) Yu Corporation
Use the following Assets section of Yu Corporations balance sheets for the years ended
December 31, 2013 and 2012 to answer the questions that follow.
Yu Corporation recorded depreciation expense of $344 million for 2012.
Refer to the information for Yu Corporation.
Required:
(1) Determine the book value of Yus property, plant and equipment at December 31,
2013 and 2012.
(2) What types of transaction(s) could have caused the change in book value of
property, plant, and equipment during 2013?
25) Dallas Company uses the indirect method of preparing the statement of cash flows
and has the following current liabilities at the beginning of the period: Accounts
Payable, $35,000; Taxes Payable, $15,000. At the end of the period, the balances of the
account are as follows: Accounts Payable, $25,000; Taxes Payable, $20,000. What
amounts will appear in the cash flow statement? In what category of the statement will
they appear?