1) The three distinct types of cost to a manufacturer are direct materials, direct labor,
and
manufacturing overhead.
2) All issued stock is outstanding.
3) Under FIFO, the units in the ending inventory represent the oldest purchase(s).
4) A stock split is similar to a stock dividend in that it results in additional shares of
stock
outstanding and is nontaxable.
5) Serial bonds are unique because the interest is paid as a series of daily payments.
6) Like sales revenue, cost of goods sold represents an inflow of assets.
7) Oakland Corp. purchased land and a building for a combined cost of $500,000.
Oakland must
A.record the $500,000 acquisition cost in an account called Land and Buildings
B.depreciate the $500,000 acquisition cost, less any residual value, over the expected
useful life of the building
C.because part of the purchase involved land, record all of the cost in the Land account
D.allocate the $500,000 acquisition cost to separate Land and Buildings accounts based
on their respective fair market values
8) Which of the following events (transactions) is an internal event for a business
entity?
A.An accountant provides services for clients
B.An accountant purchases computer equipment to maintain business records and
prepare legal documents
C.Periodically, part of the cost of the computer equipment used by an accountant is
assigned to depreciation expenses
D.An accountant receives cash payments from clients who were billed for services
9) Which one of the following documents is used in the control of cash disbursements?
A.Income Statement
B.Bank deposit slips
C.Receiving reports
D.Cash register tapes
10) Which of the following would not be considered to be an intangible asset?
A.Franchises
B.Copyrights
C.Investments
D.Goodwill
11) Manatee Company
Manatee Company was incorporated as a new business on January 1, 2012. The
company is authorized to issue 20,000 shares of $5 par value common stock and 10,000
shares of 6%, $10 par value, cumulative, participating preferred stock. On January 1,
2012, the company issued 8,000 shares of common stock for $15 per share and 2,000
shares of preferred stock for $30 per share. Net income for the year ended December
31, 2012, was $375,000.
Refer to the information about Manatee Company.
The amount of Manatees total contributed capital at December 31, 2012, is
A.$60,000
B.$120,000
C.$180,000
D.$555,000
12) [APPENDIX] Deferred income taxes is a balance sheet item for Generic Products
Company. How would it most likely be classified on the balance sheet?
A.Owners equity
B.Long-term liability
C.Expense
D.Contra liability
13) Using the future value table, a student found that the future value amount of $1 for
5 years at an annual interest rate of 10% is 1.611. The student also observed that the
future value of $1 for 5 years at 10% compounded semiannually is 1.629. This means
that
A.the more often the compounding, the higher the future value
B.the student was looking in the wrong column; the second amount should be 1.611/2
C.there was an error in the table
D.when interest is compounded semiannually, more money must be deposited to have a
desired ending balance
14) The current balance sheet of Handyman Inc. reports total assets of $20 million, total
liabilities of $2 million, and owners’ equity of $18 million. Handyman Inc. is
considering several financing possibilities in order to expand operations.
What is the additional amount that Handyman Inc. can borrow and not exceed a debt to
equity ratio of 0.3?
A.$5.4 million
B.$3.4 million
C.$5.5 million
D.$4.0 million
15) Several transactions of sales and purchase activities for Genoa Department Store
are described below.
A) Genoa purchases shoes from Nike on credit.
B) Genoa returns defective shoes to Nike before payment is made to Nike for the shoes
purchased in transaction A.
C) Genoa pays for the shoes purchased from Nike.
D) Genoa sells shoes to its customers for cash and on credit.
E) Credit customers return shoes to Genoa for a refund.
F) Credit customers pay their account balances to Genoa.
REQUIRED: For each transaction described above, describe the economic effects of
the transaction on the company under a periodic inventory system.
16) Lightning Delivery, Inc. purchased a truck on January 1, 2013, for $30,000. The
truck had an estimated life of 5 years and an estimated residual value of $5,000.
Lightning Delivery used the straight-line method to depreciate the asset. On July 1,
2015, the truck was sold for $17,000 cash. Recording the sale of the truck in 2015 has
which of the following effects on the accounting equation?
A.decreases stockholders equity
B.increases total assets
C.decreases total expenses
D.increases net income
17) The Ramien Store held inventory items at the end of 2014. Which items should
Ramien include as part of its total inventory cost?
A.Freight incurred in shipping goods to customers
B.Annual income taxes paid for operations
C.Cost of storing inventory before it is sold
D.Cost of salaries of clerks that sell the inventory items
18) A company is not required to prepare both a(n)
A.Income statement and statement of stockholders equity
B.Income statement and statement of retained earnings
C.Statement of stockholders equity and statement of retained earnings
D.Statement of cash flows and statement of retained earnings
19) Accumulated Depreciation
A.Increases when the monthly adjustment for depreciation is recognized
B.Decreases when the monthly adjustment for depreciation is recognized
C.Is reported on the income statement with the expense accounts
D.Is allocated as an expense during future periods
20) In 2012, Park Company issued $200,000 of bonds for $189,640. If the face rate of
interest was 8% and the effective rate of interest was 6.73%, how would Park calculate
the interest expense for the first year on the bonds using the effective interest method?
A.$189,640 x 6.73%
B.$189,640 x 8%
C.$10,000 x 6.73%
D.$10,000 x 8%
21) Which of the following statements is true regarding dividend income?
A.Dividend income is accrued at year-end
B.Dividend income is reported on the income statement
C.Dividend income appears in the stockholders’ equity section of the balance sheet
D.Dividend income is recognized by companies that own debt securities
22) Upon review of Jans Lakeside Resort statement of cash flows, the following was
noted:
From this information, the most likely explanation is that Jan is
A.using cash from operations and selling long-term assets to pay back debt
B.using cash from operations and borrowing to purchase long-term assets
C.using its profits to expand growth
D.using cash from investors to provide for operations
23) Rosu Company has total current assets of $120,000 and total current liabilities of
$50,000. What is the amount of working capital for Rosu Company?
A.$ 27,000
B.$ 67,000
C.$ 70,000
D.$ 91,000
24) To determine the source of a company’s assets, on which financial statement will
you look?
A.Balance sheet only
B.Income statement only
C.Both the balance sheet and the income statement
D.Both the income statement and the statement of retained earnings
25) How are the cash flow effects from the purchase and sale of intangible assets
reported on a statement of cash flows?
A.As operating activities
B.As investing activities
C.As financing activities
D.They are not reported on a statement of cash flows
26) The inventory of a(n) ____________________ consists of three distinct types of
costs: direct materials, direct labor, and manufacturing overhead.
27) You have just received an email from the new staff person, Jennifer Lark. She has
just started working in the Fixed Assets Department of your company. She would like to
know under what circumstances should she capitalize interest as part of the cost of an
asset. In a brief memo, explain the issues to Ms. Lark.
INTERNAL MEMORANDUM
TO: Ms. Jennifer Lark, Fixed Asset Department
FROM: (student name)
DATE: xxx
28) ________________________ activities involve long-term liabilities and
stockholders’ equity.
29) Cooking Corner
Cooking Corner reported inventory on its balance sheet at December 31, 2013 at
$32,000. During 2014, Cooking Corner purchased goods totaling $634,000 on account
with terms of 2/10, n/30, FOB shipping point. Total charges paid by Cooking Corner
directly to the freight company were $1,000. At the end of 2014, inventory on hand
totaled to $45,000. Net sales for 2014 totaled $1,300,000. Cooking Corner employs a
periodic inventory system.
Refer to the information about Cooking Corner.
How much is cost of goods available for sale for 2014 assuming Cooking Corner takes
advantage of one-half of the cash discounts?
30) Almost all current liabilities appear within the ___________________ Activities
category of the Statement of Cash Flows.
31) Explain what costs are included in the acquisition cost of operating assets.
32) Explain where to find the information needed to determine a companys cash flow
adequacy.